INTEGRATED REPORT 2015
Scope of reportInTRODucTIOn
The ARB Holdings 2015 Integrated report covers the period from 1 July
2014 to 30 June 2015. The previous year’s report was published in
September 2014, and does not materially differ from this report. This
report deals with the Group’s annual financial statements, operational
and strategic overview, as well as non-financial highlights.
More information on the Group and its operations can be found on
the website, www.arbhold.co.za, as well as the King III compliance
checklist, which can be found under the Investor Relations tab.
19 Divisional reviews
05Growth and expansion strategy
08A note from the Chairman
30Corporate Governance report
43Annual financial statements
Contents
1. Getting to know ARB
ARB at a glance 2
Our history 4
Highlights for the year 5
Growth and expansion strategy 5
Share trading statistics 6
2. ARB leadership
A note from the chairman 8
A letter to shareholders from the cEO 10
Feedback from the Financial Director 12
Board of Directors 14
3. Performance review
Financial highlights 17
Five-year review 18
Divisional reviews 19
Electrical division 19
Lighting division 20
corporate division 21
Value added statement 22
Sustainability report 23
4. Corporate governance
Engaging with stakeholders 29
corporate Governance report 30
Risk committee report 35
Audit committee report 38
Remuneration committee report 40
Social and Ethics committee report 42
5. Annual financial statements
Annual financial statements 43
6. Shareholder information
Analysis of shareholders 95
Shareholders’ diary 96
notice of Annual General Meeting 97
Electronic receipt of communications
and notices 103
Form of proxy 105
notes to the form of proxy 106
Glossary of terms 107
corporate information 108
1Getting to know ARB
2 ARB at a glance
4 Our history
5 Highlights for the year
5 Growth and expansion strategy
6 Share trading statistics
Getting to know ARB
| ArB Integrated report 20152
ARB at a glance
ArB Electrical Wholesalers is one of southern
Africa’s largest distributors of electrical
products.
operates out of 18 branches across South
Africa, with a presence in all nine provinces.
Provides a wide range of internationally
recognised and SABS approved products
across three main categories: power and
instrumentation, overhead line equipment and
conductors, and general low-voltage products
ArB Holdings holds a 100% interest in ArB
Global and cEd and a 74% interest in ArB
Electrical Wholesalers, which in turn owns
100% of Elektro Vroomen.
Eurolux is a leading importer and distributor
of energy saving, LEd and fluorescent lamps,
light fittings, electrical accessories and
ancillary products including fans and lighting
components.
operates out of two custom designed
distribution centres in Johannesburg and
cape town and sells to retail chains,
independent dIY and hardware chains, as
well as resellers such as specialist lighting
shops and electrical wholesalers.
ArB Holdings holds a 60% interest in Eurolux,
which in turn owns 100% of cathay Lighting.
ArB Holdings is an investment holding
company for businesses involved in the
trading and distribution of electrical, lighting
and related products.
ArB’s property portfolio, which includes
16 properties valued at approximately
r181 million, is housed under the corporate
division.
the corporate division fulfils a centralised
treasury function for the underlying operating
subsidiaries and provides strategic leadership
to the Group.
ArB Holdings holds a 100% interest in ArB It
Solutions, which provides the Group with
specialist It hardware, software, services
and support.
ARB Electrical
Wholesalers
�ARB Connect
ARB Global
Elektro Vroomen
CED
Eurolux �Cathay Lighting ARB Holdings ARB IT Solutions
Electrical division Lighting division corporate division
rEVEnuE
oPErAtInG ProFIt
21% Other
79% Electrical 19% Lighting
81% Other
38% Other
62% Electrical 22% Lighting
78% Other
15% Corporate
85% Other
2% Corporate98% Other
ArB Integrated report 2015 | 3
our PrESEncE
Eastern Cape
Western Cape
Northern Cape
North West
Free State
Gauteng
KwaZulu-Natal
Mpumalanga
Limpopo
ELEctrIcAL dIVISIon
corPorAtE dIVISIonLIGHtInG dIVISIon
Eastern Cape
East London
Free State
Bloemfontein
Western Cape
cape town
Gauteng
Johannesburg (2)
Pretoria (5)
Midrand
KwaZulu-Natal
durban (2)
Pietermaritzburg
richards Bay
Limpopo
Polokwane
Mpumalanga
nelspruit
KwaZulu-Natal
durban
Northern Cape
Kathu
North West
rustenburg
Western Cape
cape town
Gauteng
Johannesburg
Getting to know ARB
| ArB Integrated report 20154
Our history
Alan moved the operations from
the shipping container and opened the
doors to the richards Bay branch.
1981
ArB opened a branch in durban. 1988
the Pietermaritzburg operation
was acquired.2000
ArB relocated its head office
to a new 23 500 m2 site in Prospecton,
effectively expanding the facility six-fold.
2001
ArB established a branch in
Johannesburg.2002
ArB established a branch in cape town. 2003
ArB expanded its national footprint
by opening a branch in East London.2004
ArB sold a 26% stake in its key
operating subsidiary, ArB Electrical
Wholesalers, to Batsomi Power to
enhance its empowerment status.
2005
the Johannesburg branch relocated to
newly built 13 000 m2 premises in Alrode
as the base for servicing neighbouring
regions across both provincial and
international borders.
2006
ArB acquired the operations of
Xact Business Solutions to
ensure the redevelopment of
ArB’s ErP software solution.
ArB listed on the “Main Board” of the JSE.
2007
2008 Entered Mpumalanga through the
opening of the nelspruit branch.
2009 ArB relocated the cape town
branch to newly developed 7 300 m2
premises in Montague Gardens.
2010 ArB entered Limpopo through the
opening of a branch in Polokwane.
ArB acquired Paragon Electrical, a
leading electrical wholesaler operating
in the Pretoria and centurion areas.
2011 the first two ArB connect stores were
opened in Bellville and durban north.
2012 ArB acquired a 60% controlling
interest in Eurolux, a leading importer
and distributor of light fittings, lamps
and ancillary electrical products in
January 2012.
the acquisition of 100% of IcS was
completed in July 2012.
ArB signed exclusive distribution
agreements with ctc Global and
Fushi copperweld.
2013 ArB acquired 100% of Elektro Vroomen,
with branches in Bloemfontein and
Kathu. Following this acquisition, ArB
is represented in all nine provinces in
South Africa.
cEd was incorporated to house the
exclusive cHInt distribution agreement.
nexans olex exclusive distribution
agreement signed for certain
specialised cable products.
2014 new five-year exclusive distribution
agreements signed with ctc Global
and Fushi copperweld.
IcS’ branches in central Johannesburg
and rustenburg divisionalised into ArB
Electrical and rebranded accordingly.
ArB Electrical relocated its nelspruit
branch to newly developed 4 700 m2
premises in riverside Industrial Park.
2015 new rustenburg premises.
Elektro Vroomen relocated to new
premises in Bloemfontein.
Founded by chairman,
Alan r Burke, operating from a
shipping container in richards Bay, with
a single employee and a bakkie.
1980
ArB Integrated report 2015 | 5
Highlights for the year
Growth and expansion strategy
ArB’s growth and expansion strategy is focused on the following:
Market consolidation and new branch
openings to further expand the branch
network and enhance our proximity to
market
Product extension through the introduction
of higher margin exclusive agencies
Market share growth through securing
additional customers
Entering new markets through broadening
the product offering
Further diversification through the
acquisition of trading and distribution
businesses in related industrial/consumer
products
Electrical division Lighting division related diversification
Exclusive agencies gaining momentum
New Rustenburg premises completed
Product range expansion in lighting division
Strong growth in lighting division’s key customers and market segments
Getting to know ARB
| ArB Integrated report 20156
Share trading statistics
Market performance
ARB Holdings vs All Share Index (ALSI)
5 A
ug 1
4
5 Ju
l 14
5 Se
p 14
5 O
ct 1
4
5 D
ec 1
4
5 N
ov 1
4
5 Ja
n 15
5 Fe
b 15
5 A
pr 1
5
5 M
ar 1
5
5 Ju
ne 1
5
5 M
ay 1
5
550
600
650
700
750
800
ARB ALSI
ARB Holdings vs Electronic and Electrical Equipment
5 A
ug 1
4
5 Ju
l 14
5 Se
p 14
5 O
ct 1
4
5 D
ec 1
4
5 N
ov 1
4
5 Ja
n 15
5 Fe
b 15
5 A
pr 1
5
5 M
ar 1
5
5 Ju
ne 1
5
5 M
ay 1
5
550
600
650
700
750
800
ARB Electronic and Electrical Equipment
MonthHigh
(cents)Low
(cents)close (cents)
Volume (# of shares)
Value (rands)
Volume weighted price
(cents)
July 2014 700 650 695 4 324 017 28 731 238 6,64
August 2014 800 690 745 3 428 257 25 147 679 7,34
September 2014 720 650 698 13 420 076 95 469 283 7,11
october 2014 700 606 649 697 602 4 660 362 6,68
november 2014 670 625 650 8 757 206 56 988 575 6,51
december 2014 650 630 630 642 558 4 100 361 6,38
January 2015 680 605 660 893 797 5 624 754 6,29
February 2015 670 569 611 9 327 992 57 519 456 6,17
March 2015 624 590 610 2 501 725 15 231 948 6,09
April 2015 690 590 620 1 410 883 8 626 988 6,11
May 2015 620 590 592 685 181 4 086 813 5,96
June 2015 610 550 600 2 651 617 15 757 281 5,94
total for the year 150 395 147 620 162 419 48 740 911 321 944 738 6,61
Monthly average 599 588 647 4 061 743 26 828 728 6,44
total number of shares traded as a % of:
Publicly held free-float 51%
total number of shares in issue 21%
Market capitalisation at year-end (rand) 1 410 000
total value traded as a % of year-end market capitalisation 23%
Share performance:
opening share price on 1 July 2014 (cents) 652
closing share price on 30 June 2015 (cents) 600
% lost for the year 7,98%
Price earnings (“PE”) ratio 12,00
Earnings yield 8,31%
2ARB leadership
8 A note from the Chairman
10 A letter to shareholders from the CEO
12 Feedback from the Financial Director
14 Board of Directors
ARB leadership
| ArB Integrated report 20158
A note from the Chairman
oVErVIEWIt is with pleasure that I present you with
ArB’s 2015 integrated report. It has been a
tough year for the Group; however, despite
this I believe the divisions did well to not only
maintain market share but to move into new
key focused customer markets.
the Group’s largest contributing division, the
Electrical division, is still hampered by delays
in the roll out of South Africa’s national
development Plan, as well as the various
funding issues faced by Eskom.
rESuLtS For tHE YEArconsidering the tough trading environment
and the lack of the abovementioned
government and parastatal spend, ArB
delivered a satisfactory set of results.
revenue decreased by 3% to r2,1 billion
compared to the r2,2 billion achieved in the
2014 financial year. the decrease can mainly
be attributed to the decline in sales of
overhead lines due to a lack of funding at
Eskom, which negatively impacted the
Electrical division’s turnover.
the Group’s operating profit decreased by 3%
to r196,5 million (2014: r203,0), with a profit
margin of 9,1% compared to 9,2% in 2014.
Headline earnings saw a slight decrease of
0,6% to 49,99 cents per share compared to
the 50,28 cents per share in the prior period.
As a result of the continued strong cash
generation of the business and the Group’s
ungeared position, the Board has maintained
the annual dividend at 21 cents per share and
further declared a special dividend of 10 cents
per share.
I am pleased to report that ArB ended the
year with no debt and net cash resources of
r226,8 million.
dIrEctorAtEAfter five years as chief Executive officer
(“cEo”) of ArB Holdings, Byron nichles
informed the Board of his desire to pursue a
new challenge in his career. Byron was an
integral part of the establishment and
implementation of the Group’s strategy
after it listed on the Johannesburg Stock
Exchange in 2007. the Board would like to
thank Byron for his service over the past five
years and wishes him all the best for his
future endeavours.
Billy neasham was appointed acting cEo
with effect from 1 october 2014 while
retaining his role as Group Finance director.
Alan R BurkeFounder and Non-Executive Chairman
It is with pleasure that I welcome
Grant Scrutton to the ARB Board, effective
1 October 2015, as ARB’s new Financial
Director. We look forward to a long and
productive relationship going forward.
Pleasing result in
tough environment
Maintained dividend
at 20,1 cents per
share and special
dividend of 10,0 cents
per share
ArB Integrated report 2015 | 9
on 13 February 2015, Billy was appointed
cEo and has continued to act as the Group
Financial director
Following his appointment as chairman of
nErSA, non-executive director Jacob Modise
resigned, effective 12 February 2015. the
Board wants to thank Jacob for his wisdom
and insight provided over the past nine years.
It is with pleasure that I welcome Grant
Scrutton to the ArB Board, effective
1 october 2015, as ArB’s new Financial
director. We look forward to a long and
productive relationship going forward.
outLooKAlthough the overall outlook for the South
African economy, particularly in the short
term, is rather negative, I believe that ArB
remains well positioned in its various markets
to continue gaining market share and focus
on growing the key customer base. While we
do not foresee much infrastructure spend
taking place during the next financial year,
the Electrical division is ready to benefit
should there be an increase in the roll out of
the national development Plan.
While no acquisitions were completed during
the financial year, the Board will continue to
evaluate potential acquisitions to further
diversify the business.
APPrEcIAtIonI would like to thank my fellow directors for
their invaluable contribution, in both wisdom
and support, which ensures that ArB
maintains high standards of corporate
governance.
on behalf of myself and the Board, I would
like to take the opportunity to thank the
executive management team as well as each
of the over 900 ArB staff members for their
hard work in making this financial year
a success.
Lastly, to our customers, suppliers, business
partners and shareholders, I thank you for
your continued support.
Alan R Burke
non-Executive chairman
ARB leadership
| ArB Integrated report 201510
A letter to shareholders from the CEO
Billy NeashamGroup Chief Executive Officer andActing Group Financial Director
The Group will maintain its focus on optimising
operational efficiencies in its existing businesses as
well as continue to evaluate strategically aligned
trading and distribution-related acquisitions, while
further exploring additional key customers.
Net cash resources
of R226 million
Net asset value of
327,37 cents reflects
robust statement of
financial position
dEAr SHArEHoLdErSIt is with pleasure that I present to you my
first report as chief Executive officer of ArB,
for the year ended 30 June 2015.
While it has been a challenging year the
Lighting division continued to achieve market
share gains whilst the Electrical division
showed continued resilience in a challenging
trading environment. notwithstanding this,
both divisions continue to review and improve
operational efficiencies to ensure that the
Group is able to sustain its earnings.
FInAncIAL rEVIEWResultsthe Group experienced a 3% decline in
revenue to r2,1 billion, compared to the
r2,2 billion achieved in the 2014 financial
year. this is primarily due to the decline in
revenue in the Electrical division given the
lack of infrastructure spend and negative
impact of Eskom on sales in the overhead line
division, particularly in the Eastern cape and
KwaZulu-natal regions. While a trading and
procurement discipline in both divisions was
maintained, trading margins remain under
pressure. the overall trading margin
improved to 24,1% from 23,8% due to the
higher margin Lighting division contributing a
greater proportion of the Group’s trading
margin as compared to the prior year.
overheads continue to be well controlled and
there was no year-on-year growth in
overheads. operating profit declined by 3% to
r196,5 million (2014: r203,0 million), with
operating margin at 9,1% (2014: 9,2%).
A slight decline of 0,6% was experienced in
headline earnings per share to 49,99 cents
per share, compared to the 50,28 cents in the
prior period.
As a direct result of the Group’s focus on
working capital management, the Group’s
operations remain cash generative with net
interest received continuing to increase
despite paying out annual and special
dividends totalling r89,75 million in
September 2014.
net working capital increased to 22,7% of
revenue (2014: 20,3%); however, it is still
within the Group’s targeted range of 20% to
25% of turnover. Inventory levels decreased
slightly primarily due to the Electrical division
reducing its stock in line with the Group’s
inventory policy established to limit possible
inventory losses in a volatile copper price
environment. the Lighting division is,
however, currently overstocked due to the
delay in offtake by a newly contracted
customer. Management is taking steps to
manage these levels within the Group’s
parameters. the trade receivables book
continued to be well managed in a challenging
credit environment. Having said this, the
Electrical division took the decision to insure
its trade receivables with effect from 1 May
ArB Integrated report 2015 | 11
2015, while the Lighting division continues to
maintain credit insurance on its trade
receivables.
net capital expenditure for the financial
year amounted to r13,9 million (2014:
r24,7 million), of which r5,1 million was
utilised to complete the construction of
the Electrical division’s new rustenburg
premises, which was completed in September
2014.
ArB’s statement of financial position
remains robust reflecting a net asset value
per share of 327,37 cents, compared to
303,15 cents in 2014. the Group remains
ungeared with a net cash position of
r226,8 million (2014: r197,6 million).
the Group’s after-tax return on average
equity in the current year is 15,9%, slightly
lower than the 17,3% achieved in the prior
period.
Further detail on the financial results are set
out in the Financial director’s report on
pages 12 and 13 and in the annual financial
statements and accompanying notes.
DividendsGiven the Group’s continued strong cash
generation and its ungeared balance sheet,
the Board approved an annual dividend of
20,1 cents per share (2014: 20,1 cents). In
addition to the dividend the Board further
approved a special dividend of 10,0 cents per
share, in order to return excess cash to
shareholders.
Both the annual and special dividends will be
paid to shareholders on Monday, 14 September
2015.
oPErAtIonAL rEVIEWElectrical divisionthe Electrical division remains the largest
contributor to ArB’s revenue and operating
profit.
this division produced satisfactory results
given the continued delay of significant
infrastructure spend and the further lack of
available capital expenditure by Eskom in the
rural electrification programme. Full year
revenue declined by 7,2% to r1,74 billion,
compared to the r1,88 billion achieved in the
2014 financial year. Gross trading margins
continue to be under pressure, the effects of
which have been limited by the leveraging of
trading and procurement efficiencies. the
division’s operating profit decreased by 11,5%
to r122,7 million (2014: r138,6 million) and
saw a decline in operating profit margin to
7,0% (2014: 7,4%).
A more detailed review of the Electrical
division appears on page 19 of this integrated
report.
Lighting divisionI am pleased to report that through the
introduction of new product categories and the
focus on key customer gains the Lighting
division maintained its strong first half
performance to grow full year revenues by
21,3% to r425,5 million (2014: r350,8 million).
Gross trading margins were, however, lower,
impacted by a competitive environment and
the volatile exchange rate. A delay in the issue
of Letters of Authority by the national
regulator of compliance Specifications and
employee increases incurred due to growth in
market share all negatively impacted
otherwise well controlled overheads. As a
result of the increased overheads operating
profit margin reduced to 10,3% from 11,3% in
the 2014 financial year.
A more detailed review of the Lighting division
appears on page 20 of this integrated report.
Corporate divisionthe corporate division represents the Group’s
ungeared property portfolio, the centralised
treasury function and ArB It Solutions. Given
the largely fixed nature of its revenue and
overheads the corporate division’s results for
the period were in line with expectations.
the Group’s portfolio of 16 properties
increased in value by 11% and is currently
valued at r181 million, compared to the
r163 million in 2014. one of the sites situated
in Polokwane is currently undeveloped land.
corPorAtE ActIVItY And EXPAnSIon Although no new corporate activity was
undertaken during the year, acquisitions and
the further diversification of the Group
remains an integral part of ArB’s growth and
expansion strategy.
Potential acquisitions have been and will
continue to be evaluated. In the evaluation of
potential acquisitions the Board considers
the strategic fit and merits of each opportunity
and is guided by the principle that the terms
and structure of any acquisitions should be
value accretive to our shareholders.
outLooKIt is no secret that the current trading
environment is tough and that we do not
foresee this changing in the short term. the
combination of moderate economic growth,
subdued levels of fixed investment activity
and unresolved challenges relating to Eskom
all support this view and present their
own challenges.
the Group will maintain its focus on optimising
operational efficiencies in its existing
businesses as well as continue to evaluate
strategically aligned trading and distribution-
related acquisitions, while further exploring
additional key customers.
APPrEcIAtIonI would like to thank all our employees and
managers for the effort they have exerted in
this tough trading environment. Without
your hard work and dedication these results
would not have been possible. to my fellow
Board members, thank you for your guidance
and support throughout the year. to all our
customers, suppliers and business partners
I would like to express my sincere
appreciation for your support and to our
advisors for their guidance.
Billy Neasham
Group chief Executive officer
ARB leadership
| ArB Integrated report 201512
Feedback from the Financial Director
Strong revenue
growth in Lighting
but reduced revenue
in Electrical
Continued strong
cash generation
FInAncIAL PErForMAncEGroupthe Group’s consolidated turnover declined
by 3% to r2,15 billion with no new acquisitions
made during the period. operating profit
declined 3% to r196,53 million and headline
earnings was marginally down by 0,6% to
49,99 cents per share.
Being a trading business, simplistically our
business is all about managing people as
well as working capital. As such, our
overheads remain predominantly fixed with
the majority of these costs relating to
employees and the rental of warehousing
and distribution facilities. While salary
increases for the year averaged 7%, the
emphasis on variable incentives to reward
performance at all levels enabled the Group
to ensure a 1% decline in total overheads.
Gross profit margins remain under pressure
but the Group gross margin improved to
24,1% due to the higher margin contributed
by the Lighting division.
Electrical divisionthe Electrical division grew its revenue by
7,2% to r1,74 billion with operating profits
decreasing by 11,5% to r122,7 million. this
decrease in revenue was impacted by the
dearth of major infrastructure projects and
the lack of significant expenditure by Eskom
in the rural electrification programme. cEd,
while still a relatively small contributor to
this division’s turnover, continued to grow
market share and continues to attract better
margins than the traditional electrical
wholesaling business.
As part of a drive to continually improve
operational efficiencies, the Bloemfontein
branch of Elektro Vroomen was relocated to
new premises which has enhanced its
trading efficiencies and is now capable of
generating the level of returns which we as
a Group expect.
the management of working capital in this
division has been given significant attention
during the past year where stock levels,
which are constantly reviewed, at the year-
end were well within the targeted range set
by the Group. this division has, with effect
from 1 May 2015, taken the decision to take
credit insurance to mitigate the increasing
credit risk which remains a challenge to
continued growth.
Lighting divisionthe Lighting division’s revenue increased 21,3%
year-on-year to r425,5 million due to some
market share gains with key retail and dIY
customers. revenue growth has been steady
throughout the year and has necessitated a
concomitant investment in inventory given the
relatively long lead times and the necessity to
ensure the ability to service these newly
acquired customers without disrupting supply
to existing customers.
notwithstanding these market share gains, a
step change in the overheads to ensure the
sustainability of the current level of revenue,
ArB Integrated report 2015 | 13
resulted in this division’s operating profit
rising only 10,9% to r43,8 million. this reflects
the continued commitment of management to
expand the markets in which they operate and
expand the product offerings to both existing
and new customers.
Corporate divisionIn line with the Group’s preference of owning
its properties, capital expenditure during the
year was incurred in the completion of the
new branch of ArB Electrical Wholesalers
in rustenburg.
the Group’s properties are valued every three
years by an independent property valuer with
valuations updated by the same independent
valuer in the intervening two years to take
cognisance of any changes in yields, rentals
and municipal charges. As set out in notes 3
and 4 to the Annual Financial Statements, for
the current year the net revaluation adjustment
on the property portfolio was a pre-tax
increase of approximately r13,4 million, which
is included as other comprehensive income in
the statement of comprehensive income and
the adjustment is excluded from the calculation
of headline earnings and headline earnings
per share.
WorKInG cAPItAL And cASH FLoWthe emphasis on disciplined working capital
management within the Group remains a key
priority in our regular internal management
meetings and reviews.
the Group continues to set each division’s
targets as to inventory levels and working
capital as a percentage of turnover, which
recognises the different challenges facing
each division. the Electrical wholesaling
business procures the majority of its product
from local suppliers, whereas the Lighting
division, and newly established cEd, have to
deal with longer lead times from foreign
suppliers and high levels of volatility in
exchange rates.
Given the challenging credit risk environment
the Electrical wholesaling operation took the
decision, effective 1 May 2015, to insure their
debtors’ book, which is a policy that was
always applied in the Lighting division and
cEd. this provides some security, but may
also restrict growth.
our continued focus on working capital
ensured that the Group remained strongly
cash generative ending the year with an
ungeared balance sheet and net cash
resources of r226,8 million.
dIVIdEndSGiven the continued strong cash generation,
the Board approved an annual dividend
of 20,1 cents per share representing the
maximum pay-out in terms of the Group’s
formal dividend policy, being 40% of after-
tax profits. the Board further approved an
additional special dividend of 10,0 cents
per share in order to return excess cash
to shareholders. the annual and special
Given the dual roles played by me throughout the majority of the year
it has been essential to have reliable and dedicated finance teams
throughout the Group. For this I wish to express my sincere thanks.
dividends will be paid to shareholders on
14 September 2015.
concLuSIonthis past year has been a challenging one
for the Group as a whole but particularly for
the Electrical division. Both the Electrical
and Lighting divisions remain in a sound
financial position.
Given the dual roles played by me throughout
the majority of the year it has been essential
to have reliable and dedicated finance teams
throughout the Group. For this I wish to
express my sincere thanks.
I look forward to Grant Scrutton fulfilling the
role of Financial director from 1 october 2015
and trust that the finance teams will continue
to provide him the assistance and dedication
required to maintain the financial disciplines
expected in our Group to meet all our ongoing
reporting requirements on a timely basis.
Billy Neasham
Acting Financial director
ARB leadership
| ArB Integrated report 201514
Board of directors
Alan trained as an apprentice electrician
which proved to be the springboard for his
involvement in the electrical wholesale
industry. He founded ArB in 1980 in richards
Bay and has been the driving force behind its
success to date. Alan has played an integral
part in formulating and executing the
Group’s growth strategy and remains ArB’s
largest shareholder.
Billy qualified as a chartered Accountant in
1980 and has been involved with ArB
Electrical Wholesalers since 1988 as the
audit partner and professional advisor,
initially with KPMG, and then with Griffith &
Aitken. Billy joined ArB in June 2000 as
Financial director responsible for the high
level of financial discipline instilled
throughout the Group. Billy was appointed
chief Executive officer in February 2015.
ralph holds a Bachelor of commerce degree,
a Master of Business Leadership degree, and
has attended the Executive Programme at
Stanford university, uSA. ralph is an
accredited associate of the Institute for
Independent Business International. ralph
was a co-founder of Iliad Africa Limited and
served as cEo from 1998 until his retirement
in 2008.
Prior to joining Iliad, ralph held various
executive positions including as Managing
director of subsidiaries within the unihold and
Malbak groups, and as a director of Everite
Limited and Group Five Limited. ralph
currently serves on the boards of several
listed companies including Mustek Limited,
calgro M3 Holdings Limited, Accentuate
Limited and Sentula Mining Limited.
William (“Billy”) Neasham (58) Ralph Patmore (63)Alan R Burke (61)
Founder and Chairman Non-Executive DirectorYears of service to the Group: 35 years
(CA(SA))Chief Executive Officer and Acting Group Financial Director Years of service to the Group: 15 years
(BCom, MBL)Lead Independent Non-Executive DirectorYears of service to the Group: 6 years
ArB Integrated report 2015 | 15
Boel holds Bachelor of Science, Bachelor of
Engineering and LLB degrees. Boel joined
Fuchs Electronics as a development engineer
in 1973. Fuchs Electronics was later acquired
by the Barlow rand Group out of which the
reunert Group was unbundled. Boel held
many senior positions within the reunert
Group and was appointed to the reunert
Board in 1991 and as cEo in 1997, a position
he held until his retirement in 2010. He
currently serves on the boards of several
listed and unlisted companies including
digicore Holdings Limited, rEcM & calibre
Limited, capitec Bank Holdings Limited and
Pioneer Food Group Limited.
Simon qualified as a chartered Accountant
and completed his articles at Pim Goldby
(now deloitte). In 1984 he achieved an MBA
from the Graduate School of Business at the
university of cape town. Simon is the cEo,
chairman and sole shareholder of Shave &
Gibson Group (Pty) Limited, an independent
manufacturer of board packaging and the
largest manufacturer of cheques and other
security printed products in Africa. Simon is
the chairman of the Board of directors and a
trustee of clifton college as well as the
chairman of centenary Homes for Aged
(incorporating Bartle House and Blaine
House). He holds directorships in various
investment companies.
Simon Downes (56)Gerrit (“Boel”) Pretorius (67)
(B.Sc, B.Eng, LLB, PMD)Independent Non-Executive DirectorYears of service to the Group: 4 years
(CA(SA), FCMA, MBA)Independent Non-Executive DirectorYears of service to the Group: 8 years
Remuneration
and Nomination
Committee
Risk Committee
Audit Committee
Social and Ethics
Committee
3 Performance review
17 Financial highlights
18 Five-year review
19 Divisional reviews
Electrical division
Lighting division
Corporate division
22 Value added statement
23 Sustainability report
ArB Integrated report 2015 | 17
Financial highlights
SALIEnt FEAturES
Revenue
down 3% to
R2,1 billion
Operating profit
down 3% to
R197 million
Operating margin
of 9,1%
Headline earnings
per share down
0,6% to 49,99 cents
per share
Dividend
unchanged at
20,1 cents per share
Special dividend
of 10 cents declared
Ungeared with
R226,8 million
net cash on hand
Annual dividend (cents)
0
5
10
15
20
25
1514131211
nAV per share (cents)
0
50
100
150
200
250
300
350
1514131211
operating profit (r million)
0
25
50
75
100
125
1514131211
HEPS (cents)
0
5
10
15
20
25
30
1514131211
revenue (r million)
0
250
500
750
1 000
1 250
1514131211
Gross profit (r million)
0
100
200
300
400
500
600
1514131211
Performance review
| ArB Integrated report 201518
Five-year review
5 yearcAGr* 2015 2014 2013 2012 2011
Profitability
revenue (r’000) 14% 2 150 764 2 216 659 1 944 541 1 565 294 1 256 330
Gross profit (r’000) 22% 517 305 526 950 425 120 307 152 234 831
Gross profit % 24,1% 23,8% 21,9% 19,6% 18,7%
operating profit (r’000) 16% 196 527 203 029 160 475 127 504 110 245
operating profit % 9,1% 9,2% 8,3% 8,1% 8,8%
Profit after tax (r’000) 15% 153 126 154 574 123 680 100 980 88 678
Profit attributable to equity holders
of the parent (r’000) 13% 117 459 118 191 95 130 80 589 72 016
Headline earnings per share (cents) 13% 49,99 50,28 39,55 34,25 30,64
Solvency and liquidity
net asset value (r’000) 10% 769 321 712 395 656 232 582 369 527 327
net tangible asset value per share (cents) 8% 302,44 275,94 252,42 225,82 223,20
Solvency ratio (total assets: total liabilities) 4,3 3,8 3,6 3,9 4,9
current ratio (current assets: current liabilities) 3,8 3,2 3,1 3,5 4,5
net working capital as a % of revenue (%) 23% 20% 19% 21%** 18%
Inventory days (based on cost of sales) 87 85 82 69** 61
receivable days (based on revenue) 52 49 51 57** 49
Payable days (based on cost of sales)49 54 58 49** 42
Cash flow
cash generated by operating activities (r’000) 170 293 143 655 197 156 95 191 104 889
net cash on hand at year-end (r’000) 226 780 197 583 202 753 179 370 265 534
Shareholder returns
return on average shareholders’ funds 15,9% 17,3% 15,4% 14,5% 13,9%
Operations
number of staff at year-end 944 849 793 676 457
Dividends and distributions
dividend cover (times) 2,5 2,5 2,5 2,5 2,5
dividends (cents per share) 20,1 20,1 16,2 13,7 12,3
Special dividends (cents per share) 10,0 10,0 10,0 – –
Share performance
number of ordinary shares in issue (‘000) 235 000 235 000 235 000 235 000 235 000
Market capitalisation at year-end (r’000) (11%) 1 410 000 1 576 850 1 092 750 916 500 813 100
Share price:
– High (cents) 785 725 615 475 390
– Low (cents) 575 450 380 270 225
– close (cents at 30 June) (11%) 600 671 465 390 346
* compound annual growth rate.** Eurolux’s revenue and/or cost of sales for the six months ended 30 June 2012 have been annualised to enhance comparability.
for the year ended 30 June 2015
ArB Integrated report 2015 | 19
Divisional reviews
Blayne Burke CEO
contrIButIon to GrouP
1 74
0 58
5
1 87
5 87
7
0
500 000
1 000 000
1 500 000
2 000 000
FY '14FY '15
122
676
138
631
0
30 000
60 000
90 000
120 000
150 000
FY '14FY '15
7,0
7,4
001020304050607 08
FY '14FY '15
Electrical division
revenue operating profit operating margin
oVErVIEWthe Electrical division is southern Africa’s
leading independent distributor of a wide
range of internationally recognised and SABS
approved electrical products across three
main categories; power and instrumentation
cables, overhead line equipment and
conductors, and general low-voltage products
and lighting. ArB’s electrical division also
holds exclusive distribution agencies for
several major international brands. the
Electrical division services the electrical
contracting, construction, large industry,
mining, domestic and public sectors in sub-
Saharan Africa.
FInAncIAL rEVIEWthe division ended a difficult trading period with
revenue down by 7% to r1,74 billion, compared
to the r1,87 billion achieved in the comparable
period. the continued lack of infrastructure
spend and more importantly the issues with
Eskom’s funding, all negatively impacted the
division. operating profit declined by 11,5% to
r122,7 million (2014: r138,6 million) resulting
in a slight decrease in operating profit margin
to 7,0% (2014: 7,4%).
oPErAtIonAL rEVIEWthe trading environment was marked by
lower volumes and an increase in credit risk
as economic activity slowed throughout the
year putting pressure on project originators
who in turn have opted to place projects on
hold. Furthermore, as mentioned Eskom’s
budgetary constraints curtailed the release
and execution of electrification projects,
which negatively affected our overhead line
business.
the low voltage business continued to grow
but at a slower pace as compared to previous
years, as a result of lower sales in cable
accessory products.
the exclusive product ranges of Accc and
copperweld have enjoyed success over the
past year, with two projects executed in
Mozambique, using the Accc conductor.
2016 outLooKA number of initiatives are under way to
improve the division’s competitiveness and
growth prospects. the ArB connect branch
model has been finalised and the division is
in the process of identifying new sites in
Johannesburg, cape town and durban.
Investment in human capital remains a key
objective for 2016 and the division has made
a large commitment to identify and train
various individuals at various levels within
the division.
R’0
00
R’0
00 %
Performance review
| ArB Integrated report 201520
Divisional reviews continued
oVErVIEWthe Lighting division is a leading importer
and distributor of light fittings, light sources
and related electrical products and
accessories servicing the retail, wholesale,
commercial and industrial sectors of the
market in sub-Saharan Africa.
FInAncIAL rEVIEWFor the trading period under review the
division achieved revenue growth of 21% to
r425 million compared to the r350 million
achieved in 2014. the revenue growth is
primarily due to the introduction of new
product categories and a focus on key clients.
the division’s operating profit increased by
10,8% to r43,8 million (2014: r39,5 million).
However, due to a delay in the issue of
Letters of Authority by the national regulator
of compliance Specifications and employee
cost increases, the division’s operating
margin decreased to 10,3% from 11,3% in the
prior period.
oPErAtIonAL rEVIEWthe division was able to achieve revenue
growth in a difficult trading environment with
slow and uncertain economic growth and a
currency which has depreciated by 14,8%.
the tightening economy has made it
challenging to pass on price increases.
the strategy to focus on key customers,
together with an approach that offers
complete retail solutions for each store
continues to bear fruit. the new product
ranges that have been introduced into the
market are adding additional revenue
streams for the division and are still in the
early stages of the development cycle.
due to the high rate of growth and strategic
targeting of customers with specific product
requirements, stockholding has been high for
most of the financial year as the division
endeavours to find the correct stock levels.
Inventory management remains a key focus
for the division.
2016 outLooKnew showrooms are in the process of being
built to house the new and exciting product
ranges from Europe. Some of the stock is
already available and has been well received
by the market. the new product ranges will
continue to be a focus into the 2016 financial
year.
Peter Willig Managing Director
Lighting division
contrIButIon to GrouP
revenue operating profit operating margin
425
499
350
851
0
100 000
200 000
300 000
400 000
500 000
FY '14FY '15
43 8
00
39 5
11
0
10 000
20 000
30 000
40 000
50 000
FY '14FY '15
10,3
11,2
0
2
4
6
8
10
12
FY '14FY '15
R’0
00
R’0
00 %
ArB Integrated report 2015 | 21
corPorAtE dIVISIonthe corporate division represents the
Group’s ungeared property portfolio, the
centralised treasury function and ArB
It Solutions.
FInAncIAL rEVIEWGiven the largely fixed nature of the division’s
revenue it performed in line with expectations.
the division increased revenue by 9% to
r38,2 million compared to the r35,1 million
achieved in the 2014 financial year. operating
contrIButIon to GrouP
revenue operating profit operating margin
profit grew by 12,4% to r31,6 million (2014:
r26,7 million).
the market value of the Group’s properties
portfolio of 16 properties grew to r181 million
(2014: r164 million).
oPErAtIonAL rEVIEWdevelopment of the rustenburg property,
including a sales counter, office and warehouse
space, was completed during the financial
year.
2016 outLooKA significant portion of the corporate
division’s revenue, which comprises rentals
received from its underlying subsidiaries,
monthly It charges and interest earned, is
annuity-based and its overheads are largely
fixed giving rise to a fairly predictable and
consistent annual performance.
Billy NeashamManaging Director
corporate division
38 2
19
35 0
58
0
10 000
20 000
30 000
40 000
FY '14FY '15
26 7
32
31 3
16
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
FY '14FY '15
82,7
76,2
0
20
40
60
80
100
FY '14FY '15
R’0
00
R’0
00 %
Performance review
| ArB Integrated report 201522
Value added statementfor the year ended 30 June 2015
Figures in rand 2015 2014
revenue 2 150 764 335 2 216 658 993
other income 4 060 893 4 878 033
Less: cost of products and services (1 765 873 260) (1 835 515 424)
Value created 388 951 968 386 021 602
Income from investments 15 174 969 11 442 210
Total wealth created 404 126 937 397 463 812
Wealth distributed
Employees
– Salaries, wages and benefits 181 244 559 171 496 054
Providers of capital 89 846 091 71 159 316
Interest on borrowings 95 091 189 316
dividends to shareholders 89 751 000 70 970 000
Government
taxation and levies 52 159 343 63 918 382
Retained in the Group 80 876 944 90 890 060
reserves 63 374 886 83 604 215
deferred taxation 6 321 694 (4 210 132)
depreciation 11 180 364 11 495 977
404 126 937 397 463 812
98%
22% Providers of capital
13% Government
20% Retained in the Group
45% Employees
distribution of wealth 2015
98%
18% Providers of capital16% Government
23% Retained in the Group
43% Employees
distribution of wealth 2014
ArB Integrated report 2015 | 23
Sustainability report
At ArB we acknowledge the importance of
prioritising social and environmental
awareness practices alongside financial
reporting, and are committed to sustainable
transformation as a business imperative to
ensure that we make a positive contribution
to the South African economy, our
stakeholders, the environment and the
communities within which we operate.
We broadly define stakeholders as our
employees, shareholders, our customers,
suppliers, business partners, the government
and the communities within which we
operate. A report detailing stakeholder
engagement can be found on page 29 of this
Integrated report.
EconoMIcon page 22 of the Integrated report we have
included a wealth distribution breakdown
detailing the economic value generated and
distributed by ArB during the 2015 financial
year. Proportionately less wealth was retained
in the Group (20% vs 23% in the prior year)
due to the Group’s ungeared balance sheet
and significant cash resources.
ArB’s cash flow requirements to run its
operations and pay for capital expenditure
are funded internally from cash generated by
its operations. ArB does not receive any
financial assistance from the government.
EnVIronMEntArB is committed to ensuring that we take
preventative measures to protect the
environment. A dedicated member of
operational management at each of the
Group’s operations is responsible for the
waste and environmental management at
his/her respective operation. none of ArB’s
operations have a harmful effect on the
environment and no habitats need to be
protected or restored due to our operations.
recycling of all hydrocarbons and the
removal of dangerous substance wastes
(eg fluorescent tubes) is undertaken by a
registered waste management company,
Interwaste. ongoing “cleaning and Greening”
takes place at each branch to ensure that
verges and approaches to properties are
well kept.
Since 2009, Eurolux has been part of a lighting
industry body which, in conjunction with
Eskom and the department of Environmental
Affairs, is investigating various alternatives for
the safe and environmentally friendly disposal
and recycling of fluorescent and high-intensity
discharge lamps containing mercury.
until the above initiative is formalised,
Eurolux has, over the past number of years,
offered a free service to its customers, who
are able to drop off all used lamps at Eurolux’s
premises. these lamps are then safely
crushed and deposited into custom
manufactured recycling drums which are
collected by an approved waste recycling
company and delivered to the Holfontein
Hazardous Waste Plant near Springs.
At this stage, we do not measure our use of
water, energy or our carbon footprint as we
believe that none of the ArB divisions or their
respective subsidiaries has a major effect on
the environment. We will, however, review
this on an annual basis and should the
circumstances change, the necessary
processes will be implemented.
LABour PrActIcES And dEcEnt WorKEmployees ensure that ArB remains
competitive, its service levels remain high
and its business is conducted in an ethical
and ultimately, profitable manner. our
commitment to our employees spans a
variety of sustainability issues including
employment equity, health and safety, basic
human rights, HIV/AIdS and skills
development, each of which is discussed
below. We are further guided by prevailing
legislation including the Basic conditions of
Employment Act, the Labour relations Act,
the Skills development Act, the occupational
Health and Safety Act and the Employment
Equity Act to name a few.
during the course of the year no incidents of
human rights violations were reported.
neither ArB nor any of its subsidiaries make
or made use of child labour. to the best of our
knowledge, neither did any of our suppliers.
As at 30 June 2015, there were 944 employees
(2014: 849) across all Group companies.
Employee gender, race and age breakdowns
total employees by age group
98%
37% 30 years or younger
11% 46-55 years
6% older than 55 years 47% 31-45 years
total employees by gender
98%
73% Male
27% Female
total employees by race
98%
26% White
14% Indian
8% Coloured51% African
Performance review
| ArB Integrated report 201524
Sustainability report continued
EMPLoYMEnt EquItYArB’s recruitment policies are codified in
accordance with the Employment Equity Act to
attract the necessary competencies while
creating equal employment opportunities. our
policies are geared towards attracting,
retaining and promoting our staff through
career development and succession planning
at all levels. to support these objectives,
innovative recruitment strategies are used
including psychometric testing and pre-
employment assessments, where appropriate.
SKILLS dEVELoPMEntArB recognises the value of fostering an
inspiring environment to ensure that each
staff member is given the opportunity to
achieve his/her maximum potential. An
ongoing career promotion programme
ensures that each staff member is afforded
an equal opportunity to grow through
business administration, management and
commercial courses funded by the Group.
In addition, ArB provides study loans to
qualifying employees to further their education.
We are not only committed to the ongoing
training of employees, but to life skills
teaching as well. to date, ArB has held
training in the following areas: basic
computer skills, primary healthcare,
HIV/AIdS awareness and life orientation.
our learnership programme provides
opportunities to unemployed school leavers
from a disadvantaged background. At year-
end, the Electrical division supported
41 disabled learners, 54% of which were
female and all of whom were from previously
disadvantaged backgrounds. the learnership
programme runs for a 13-month period
during which the learners receive formal
training in accredited programmes including
domestic services, cleaning and hygiene and
business practices, depending on the nature
of their disability. For the duration of the
programme, ArB pays each learner a
monthly stipend. on the successful
completion of the course, each learner
receives a completion bonus from ArB as
well as a nqF1 General Education and
training certificate.
For the year ended 30 June 2015, ArB’s
aggregate skills development spend
amounted to r1,3 million (2014: r2,4 million).
the decrease was as a result of the non-
recurrence in the current year of the It
training following the upgrade to the Xact II
ErP solution implemented in the prior year.
HEALtH And SAFEtYArB is committed to ensuring a safe and
healthy working environment and ensures
strict compliance with the occupational
Health and Safety Act.
our internal audit function is tasked with the
responsibility of maintaining health and
safety policies and procedures and monitoring
compliance thereto. to this end, a
comprehensive health and safety manual is
maintained in accordance with current
legislation and best practices. In addition,
health and safety committees have been
established at each of our branches and all
health and safety representatives receive
external training to ensure that they are
familiar with the legislative requirements
and are equipped to discharge their
responsibilities in this regard.
Each branch is assessed quarterly according
to an assessment module to ensure that legal
requirements as determined by current
legislation are met and adhered to.
“toolbox talks” are held on a regular basis to
identify and deal with ongoing safety issues.
Where risk issues are identified, appropriate
measures are taken to mitigate such risk.
ArB’s commitment to health and safety is
proving effective with no major incidences
reported during the past year.
HIV/AIdSAs a responsible corporate citizen, ArB shares
concern of the HIV/AIdS pandemic threatening
South Africans and is committed to minimising
the implications of the disease through
proactive HIV/AIdS workplace programmes.
At ArB we draw on the government’s policy on
HIV/AIdS as a guideline for our HIV/AIdS
awareness programme.
(Broad-based) Black Economic Empowerment (“B-BBEE”)ArB’s main trading subsidiaries have
achieved the following B-BBEE ratings:
ArB Electrical Wholesalers – Level 3
contributor verified by BEE rated, a SAnAS
B-BBEE Verification Agency on 2 April 2015;
Elektro Vroomen – Level 2 contributor
verified by BEE rated, a SAnAS B-BBEE
Verification Agency on 29 April 2015;
Eurolux – Level 7 contributor verified by
Moore Stephens BKV B-BBEE Verification
and consulting on 22 May 2015; and
cEd – is currently non-compliant.
the Group’s main subsidiaries have each
completed a gap analysis in order to assess the
impact of the proposed revisions to the B-BBEE
codes. once these codes have been finalised,
appropriate strategies will be implemented.
B-BBEE ownershipBlack-owned investment company, Batsomi
Power, has held a 26% ownership interest in
the Group’s main operating subsidiary, ArB
Electrical Wholesalers, since 2005. Batsomi
holds an indirect ownership interest of 26% in
Elektro Vroomen.
Corporate governance and ethicsthe Board recognises that good corporate
governance is vital to the sustainable growth
of ArB. the Group’s corporate governance
structures and procedures as well as its code
of conduct and Ethics are detailed in the
corporate Governance report appearing on
pages 30 to 34 of this Integrated report.
Corporate Social Investment (“CSI”) ArB is committed to the socio-economic
development and empowerment of the
local communities in which we operate.
through the Electrical and Lighting divisions,
we actively support a number of initiatives
aimed at improving living conditions
which include supporting underprivileged
schools, orphanages, shelters and HIV/AIdS
programmes.
ArB Integrated report 2015 | 25
For more information about the ithemba trust, please visit www.ithembatrust.org
ithemba Projects
ithemba trust is a charitable trust primarily committed to the funding of projects that assist in the development, treatment and rehabilitation
of intellectually challenged and physically disabled children.
the ithemba trust plays a role in assisting with the alleviation of problems such as a lack of knowledge, training, skills or diagnostic ability to
effectively deal with the treatment of the intellectually disabled. the trust funds skilled professionals to initiate socially empowering,
multidisciplinary, hands-on training programmes for care workers within local communities involving the physical and intellectual development
of each child.
ELEctrIcAL dIVISIon'S cSI InItIAtIVESorganisations which benefited directly from the Electrical division’s cSI programme during the past year include:
For more information about the domino Foundation, please visit www.domino.org.za
the domino Foundation
A non-profit organisation that creates essential structures geared to
meet the needs of the vulnerable and impoverished in communities.
the domino effect is achieved through focused interventions
including domino Babies Homes, domino Feeding, domino Early
childhood development and domino Learning for Life.
ArB EW durban-Head office Social committee partnered with the
domino Foundation for Mandela day. 67 minutes were spent on the
SArMIE StAcK where 300 Sandwiches were prepared and packaged
for hungry children. Prior to Mandela day, various departments ran
a collection drive where food, warm second hand clothes and toys
were collected and donated to the domino Foundation to distribute
to the needy.
Performance review
| ArB Integrated report 201526
Sustainability report continued
For more information on the robin Hood Foundation, please visit www.robinhoodfoundation.co.za
the robin Hood Foundation
A non-profit organisation that runs a series of projects each year aimed at providing some relief to poverty-stricken communities. Amongst the
projects run by the robin Hood Foundation are the following:
Love the babies – through this project, needy mums from AIdS affected communities are given a “Love the Babies” bag for the first
year of their new baby’s life. A “Love the Babies” bag is essentially a baby shower in a bag.
Gogo Bags – the foundation decided to extend their support to not only help new needy mums but also to help the grannies who look
after their orphaned grandchildren.
Bless a granny and grandpa – this project visited 16 different old age homes over the past year, bringing grannies and grandpa’s
presents in an effort to make them feel loved and appreciated. though they might have beds and food to eat many of them have no family
or their families are far away and don’t often visit.
child headed homes – this project was created to assist the orphaned children affected by the AIdS pandemic, who are caring for
their siblings.
East coast radio – toy Story
ArB durban managed to collect a whopping 574 toys for the toy story campaign in december 2014.
the durban procurement team collected 336 toys.
ArB Integrated report 2015 | 27
LIGHtInG dIVISIon'S cSI InItIAtIVESthe Lighting division’s cSI initiatives during the year benefited the following organisations:
other cSI initiatives
ArB Electrical has a bursary scheme in place for the education of its employees’ children. In terms of the scheme, basic and higher education
fees are paid for up to two children per qualifying employee on a non-recourse basis. during the current year, 46 children (2014: 42) benefited
directly from the scheme, 86% of whom are from previously disadvantaged backgrounds (2014: 81%).
In addition to the above monetary donations, significant donations of stock were made to various FEt colleges during the year.
From time to time, in lieu of corporate gifting over the festive season, the various companies within the ArB Group contribute to the upliftment
of the communities in which they operate.
For the year ended 30 June 2015, ArB Group companies’ aggregate cSI spend decreased by 39% to r1,4 million (2014: r2,3 million).
Inkwenkwezi High School
In June 2014, the Eurolux team sanded and vanish school desks for
Inkwenkwezi High School in du noon.
Buttering of Bread
Eurolux cape town staff comes together every Friday morning to
butter bread for the community of Joe Slovo. We butter 240 sandwiches
in total.
raven old Age Home
our qc department in Johannesburg goes and does maintenance at
the raven old Age home on certain Saturdays. this is to replace
lights, put in new lights and to check if all electrical wires are in good
working order.
Growing up Africa
Eurolux has come to together with other companies in the construction
industry to help build a devland Soweto community Education
campus. We have contributed by buying 6x trucks of cement towards
the building of this campus.
4 Corporate governance
29 Engaging with stakeholders
30 Corporate Governance report
35 Risk Committee report
38 Audit Committee report
40 Remuneration Committee report
42 Social and Ethics Committee report
ArB Integrated report 2015 | 29
ARB’s stakeholder engagement
Stakeholder type of engagement
Shareholders/investment community SEnS announcements
Interim and final results presentations
Active website
dissemination of information to a detailed contact list
conference calls and meetings
Investor site visits and open days
JSE showcase presentations
rMB Morgan Stanley off-Piste conference
Bi-annual Investor update newsletter
customers Formal business meetings, presentations relating to products, telephone calls, credit checks
and reviews, trade shows
Employees quarterly newsletter
Internal staff meetings at Group and subsidiary level
“toolbox talks”
training and development
Grievance procedures
Performance reviews
Suppliers Formal business meetings, presentations on products, trade shows
Government/parastatals Meetings, industry body representation and conference participation
regulators reporting, correspondence, formal meetings and feedback sessions
Financiers Formal one-on-one meetings as well as telephonic discussions
trade unions Ad hoc engagement
communities Extensive cSI initiatives and participation by both the Group’s divisions
ArB’s various stakeholders are identified in the diagram below. Stakeholders are seen as groups or individuals impacted by ArB’s operations.
At ArB we are committed to constructive, transparent and continuous engagement with all our stakeholders.
Customers
Communities
Suppliers Regulators
Trade unions
Shareholders/ investment community
Government/parastatals
Employees
Financiers
Corporate governance
| ArB Integrated report 201530
Corporate Governance report
IntroductIonthe directors of ArB acknowledge the
importance of good corporate governance
and are committed to implementing the code
of Governance Principles (“the code”) as set
out in the King code of Governance for South
Africa 2009 (“King III”) as well as the Listings
requirements of the JSE Limited (“the JSE”)
and all other applicable laws. In implementing
King III, the directors subscribe to the need
to manage the Group based on the principles
of integrity and accountability. the Group’s
corporate governance structures and policies
are evaluated on an ongoing basis and are
amended, as appropriate, in response to
changes within and external to the Group. In
terms of the JSE Listings requirements, all
listed companies are required to apply the
principles and recommendations set out in
King III.
StAtEMEnt oF coMPLIAncEthe JSE Listings requirements require listed
companies to report on the extent to which
they comply with the principles and
recommendations set out in King III.
to the best of the Board’s knowledge and
belief, the only areas of possible (partial)
non-compliance with the recommendations
set out in King III are as follows:
ArB’s chairman, Alan r Burke, is not
classified as being independent given his
material shareholding in the company.
As per the recommendations of King III,
ArB has appointed a Lead Independent
director to compensate for the lack of an
Independent non-Executive chairman, as
well as ensured that in terms of the
composition of the Board, the number of
non-Executive directors on its board
exceeds the number of Executive directors,
and further that the majority of non-
Executive directors are independent.
ArB’s chief Executive officer, William
(“Billy”) neasham, also acted as Group
Financial director for the majority of the
financial year after being appointed as
chief Executive officer following the
resignation of Byron nichles.
A Group Financial director has been
appointed post the year-end and will
commence his duties on 1 october 2015.
A formal induction programme for
directors is in the process of being
developed. regulatory updates and
changes in laws and risks are circulated to
the Board on a regular basis.
not all aspects of the company’s
sustainability reporting and disclosure are
independently assured. the Audit
committee, which comprises a majority of
Independent non-Executive directors, is
responsible for overseeing the reporting on
sustainability and for reviewing the
Integrated report. the Board has further
adopted a combined assurance model with
certain aspects of the Group’s reporting
being independently assured while other
aspects are internally, but independently,
assessed and reported on by, for example,
the internal audit function which reports
directly into the independent chairman of
the Audit committee.
Accordingly, the Board is satisfied that, to the
best of its knowledge and belief, ArB has,
where practical, complied with the
aforementioned requirements.
the complete King III compliance checklist
is available on the company’s website –
www.arbhold.co.za – under the Investor
relations section.
tHE BoArdthe Group is led by an effective, unitary
Board. notwithstanding the delegation by the
Board of certain powers and authorities to
executive management and sub-committees,
the Board is ultimately responsible for
retaining full and effective control over the
Group. decisions on material matters are
reserved for the Board. the Board currently
comprises five directors; one Executive
director, being the Group chief Executive
officer and the acting Group Financial
director, and four non-Executive directors,
three of whom are independent. consistent
with the recommendations set out in King III,
the Board comprises a majority of non-
Executive directors, the majority of whom are
independent. the Independent non-Executive
directors ensure that no one individual has
unfettered powers of decision making and
authority so as to protect the best interests
of all shareholders. the non-Executive
directors have unrestricted access to
management.
directors are encouraged to stay abreast of
the Group’s businesses through independent
site visits and meetings with executive
management.
All directors are entitled, at ArB’s expense,
to seek independent professional advice on
any matter pertaining to the Group where
they deem this necessary.
All directors have the requisite knowledge
and experience required to properly execute
their duties.
A brief curriculum vitae for each director is
set out on pages 14 and 15 of this Integrated
report.
In terms of the company’s Memorandum of
Incorporation, one-third of the non-Executive
directors are required to retire by rotation at
the next Annual General Meeting and their
reappointment is subject to shareholder
approval.
Board meetings are held quarterly and more
frequently, if required. directors are provided
in advance with all necessary information to
enable them to discharge their duties. Any
director may request that additional matters
be added to the agenda. Proceedings at
Board meetings are properly minuted and all
minutes are circulated to all Board members
for review prior to being approved. In addition,
Executive and non-Executive directors meet
informally on a regular basis.
ArB Integrated report 2015 | 31
Attendance at meetingsdetails of directors’ attendance at Board
meetings held during the year are set out
below. Figures in brackets indicate the
number of meetings that each director was
eligible to attend.
director Attendance
Ar Burke (chairman)* 4/(4)
St downes** 4/(4)
Jr Modise* – resigned
12 February 2015 2/(3)
Wr neasham (Financial) 4/(4)
B nichles (cEo) – resigned
31 october 2014 1/(1)
rB Patmore**# 4/(4)
G Pretorius** 4/(4)
* non-Executive.** Independent non-Executive.# Lead Independent director.
Chairmanthe Board is chaired by Alan r Burke, founder
and the largest shareholder of ArB. As
recommended by King III, the role of
chairman is separate from that of Group
chief Executive officer. the chairman, a non-
Executive director, is not independent as
recommended by King III hence the
appointment of a Lead Independent director
as discussed below. the chairman provides
leadership and guidance to the Board and
encourages active debate and proper
deliberation on all matters requiring the
Board’s attention while obtaining input from
the other directors. the chairman is further
responsible for representing the Board to
shareholders.
Lead Independent DirectorIn accordance with King III, a Lead
Independent director, ralph Patmore, has
been appointed.
Group Chief Executive Officer and Executive Directorsthe Group chief Executive officer, together
with the other Executive directors, is
responsible for implementing the Group’s
strategic plan and operational decisions in
respect of the day-to-day running of the
business while the non-Executive directors
provide oversight and guidance in this
regard.
the Group chief Executive officer and Group
Financial director meet formally each month
with each of the divisional and subsidiary
Managing directors and/or Group chief
Executive officers to discuss financial,
operational and strategic matters.
Each operating entity within the Group has its
own executive management committee that
meets regularly to discuss and attend to the
day-to-day management of their respective
businesses.
After the resignation of Group chief Executive
officer Byron nichles on 29 August 2014
(effective 31 october 2014), William (“Billy”)
neasham performed both the duties of the
Group chief Executive officer as well as the
Group Financial director. Grant Scrutton has
been appointed as Group Financial director,
effective 1 october 2015.
Company Secretary the company Secretary advises the Board on
the appropriate procedures for the
management of meetings and implementation
of governance procedures, and is further
responsible for providing the Board
collectively, and each director individually,
with guidance on the discharge of their
responsibilities in terms of the legislative and
regulatory requirements applicable to the
company. the company Secretary is further
responsible for ensuring regulatory and
legislative compliance by the Group. All
directors have unrestricted access to the
company Secretary.
Furthermore, Mario Louw is not a director,
nor is he related or connected to any of the
directors, thereby ensuring an arm’s-length
relationship between the company Secretary
and the Board. on an annual basis, the Board
the Board
Remuneration and Nominations Committee
Risk Committee
Audit Committee
Social and Ethics Committee
Executive Non-Executive(3 independent)
Sub-committees
2 5
Corporate governance
| ArB Integrated report 201532
Corporate Governance report continued
considers and confirms that it is satisfied
with the competence, qualifications and
experience of the company Secretary. this
review was performed at the Board meeting
held on 19 August 2015 whereat the Board
considered the performance of the company
Secretary during the past year, in light of his
experience and qualifications and was
satisfied therewith. the Board also
reconfirmed that the arm’s-length
relationship between the company Secretary
and the Board remained intact.
the certificate required to be signed by the
company Secretary in terms of section 88(2)
of the companies Act, appears on page 45 of
this Integrated report.
Appointment of new Directorsthe Board constantly assesses its
composition to ensure that it comprises the
appropriate balance of skills, experience and
competency levels required to effectively
discharge its duties.
All directors are required to assist in
identifying and nominating potential Board
candidates. the Board, chaired by Alan
r Burke, is responsible for evaluating the
suitability of any Board candidate and for
formalising any appointment in this regard.
All new directors are subject to election by
shareholders at the first Annual General
Meeting following their initial appointment by
the Board.
Board Charterthe Board is regulated by a formal Board
charter which sets out the role of the Board
and the responsibilities of the directors. the
comprehensive charter addresses matters
relating to Board composition, leadership,
remuneration, evaluation, Group processes
and procedures, key operational risks and
corporate governance. the charter provides
the Board with a mandate to exercise
leadership, determine the Group’s vision and
strategy and monitor operational performance.
the specific duties and responsibilities of the
Board as codified by the charter include:
Strategy and planning, including the
approval of annual budgets;
defining of the required competencies as
well as the number and profile of Board
members, which includes reviewing the
performance of the Group chief Executive
officer, Executive directors and the
company Secretary;
Succession planning at senior executive
level;
remuneration of non-Executive directors
and of Executive directors;
Executive short and long-term incentive
schemes;
capital management and allocation;
Performance monitoring;
risk management;
Audit and compliance, including the
appointment of the external auditors as
well as the definition and scope of their
function;
review of the internal control environment
and compliance; and
Policies dealing with conflicts of interests
and codes of conduct including related-
party transactions, share dealings by
directors, and insider trading.
Evaluation of the Board and Directorsthe Board conducts a self-evaluation
exercise on an annual basis reviewing its role,
processes, sub-committees and performance
in accordance with the Board charter.
In addition, an assessment of each director’s
performance is undertaken annually by
the chairman.
BoArd SuB-coMMIttEESthe following sub-committees have been
established to assist the Board in discharging
its responsibilities:
Audit CommitteeMembers: Simon downes (chairman),
ralph Patmore, Gerrit (“Boel”) Pretorius
the Audit committee is chaired by an
Independent non-Executive director, Simon
downes, and comprises two further
Independent non-Executive directors, ralph
Patmore and Gerrit (“Boel”) Pretorius. the
Group chief Executive officer and Group
Financial director as well as the external
auditors and the internal auditor attend all
Audit committee meetings by invitation and
management or independent third parties
are invited to attend as appropriate. the
external auditors and the internal auditor
have unrestricted access to the chairman of
the Audit committee. the company Secretary
is the secretary of the Audit committee.
the Audit committee is evaluated annually.
during the year the Audit committee met
three times, which the directors believe is
sufficient for the purpose of discharging the
committee’s responsibilities. Additional
meetings are convened as required. details
of directors’ attendance at the Audit
committee meetings held during the year are
set out on page 39.
the Audit committee’s report for the year
ended 30 June 2015 is set out on page 38.
Risk CommitteeMembers: Simon downes (chairman),
Alan r Burke, ralph Patmore, Gerrit (“Boel”)
Pretorius, William (“Billy”) neasham
the risk committee is chaired by Simon
downes, an Independent non-Executive
director, and its members include ralph
Patmore and Gerrit (“Boel”) Pretorius
(Independent non-Executive directors), Alan
r Burke (non-Executive director and
chairman of the Board) as well as the two
Executive directors. the chief Executives of
the Group’s major operating entities attend
the meetings by invitation. the company
Secretary is the secretary of the risk
committee.
the risk committee operates in terms of a
formal charter approved by the Board. the
risk committee is evaluated annually.
during the year the risk committee met four
times, which the directors believe is sufficient
for the purpose of discharging the committee’s
responsibilities. Additional meetings are
convened as required. details of directors’
attendance at the risk committee meetings
held during the year are set out on page 37.
the risk committee’s report for the year
ended 30 June 2015 is set out on page 35.
ArB Integrated report 2015 | 33
Remuneration and Nominations CommitteeMembers: ralph Patmore (chairman),
Alan r Burke, Simon downes, Gerrit (“Boel”)
Pretorius
the remuneration committee is chaired by
ralph Patmore, the Lead Independent non-
Executive director, and its members include
Gerrit (“Boel”) Pretorius and Simon downes
(both Independent non-Executive directors)
and Alan r Burke (non-Executive director and
chairman of the Board). the Group chief
Executive officer and Group Financial director
are invited to attend remuneration committee
meetings but may not participate in
discussions regarding their own remuneration.
the company Secretary is the secretary of the
remuneration committee.
the remuneration committee operates in
terms of a formal charter approved by the
Board. the remuneration committee is
evaluated annually.
during the past year, the remuneration
committee met three times, which
the directors believe is sufficient for the
purpose of discharging the committee’s
responsibilities. Additional meetings are
convened as required. details of directors’
attendance at remuneration committee
meetings held during the year are set out on
page 41.
the remuneration committee’s report for
the year ended 30 June 2015 is set out on
page 40.
Social and Ethics CommitteeMembers: Gerrit (“Boel”) Pretorius
(chairman), Simon downes, Shannon Bester
and nellie Mlambo
the Social and Ethics committee is chaired by
Independent non-Executive director, Gerrit
(“Boel”) Pretorius and comprises one further
Independent non-Executive director, Simon
downes, as well as Shannon Bester,
the Financial director of ArB Electrical
Wholesalers, the Group’s largest operating
entity, and nellie Mlambo, the ArB Electrical
Group’s Human resources Manager. the
Group Financial director attends the meetings
by invitation. the company Secretary is the
secretary of the Social and Ethics committee.
the committee is governed by a formal
charter approved by the Board. the Social
and Ethics committee is evaluated annually.
during the past year, the Social and Ethics
committee met twice which the directors
believe is sufficient for the purpose of
discharging the committee’s responsibilities.
Additional meetings are convened as
required. details of directors’ attendance at
the Social and Ethics committee meetings
held during the year are set out on page 42.
the Social and Ethics committee’s report for
the year ended 30 June 2015 is set out on
page 42.
BEnEFIcIAL SHArEHoLdInGSthe beneficial shareholdings of the directors
of the company and its subsidiaries are set
out in note 12 of the directors’ report on page
46 of this Integrated report.
SHArE dEALInGSdirectors are required to disclose their
shareholdings and any dealings in shares of
the company to the chairman and Group
chief Executive officer or Group Financial
director, who together with the company’s
sponsor ensure that any such dealings are
published on SEnS in compliance with the
JSE Listings requirements. In addition, all
company directors and all subsidiary
directors, including the company Secretary,
are prohibited from dealing in the shares of
the company during prohibited periods or at
any time when they are in possession of
unpublished price sensitive information in
relation to those shares. the consent of the
chairman is required before any director or
member of senior management, including
the company Secretary, can deal in the
company’s shares.
IntErEStS In contrActSdirectors are required to inform the Board
timeously of conflicts or potential conflicts of
interest they may have in relation to the
Group and any of its businesses. directors
are obliged to recuse themselves from
discussions or decisions on matters in which
they have a conflict of interest.
codE oF conduct And EtHIcSEvery employee within the ArB Group is
required to subscribe to a formal code of
Ethics (“the code”) which stipulates the
Group’s commitment to the highest standards
of corporate governance and compliance with
the laws of South Africa. the code sets out
standards of integrity and ethics in dealings
with suppliers, customers, business partners,
stakeholders, government and society at
large. It requires all employees to act with
honesty and integrity in all dealings with
stakeholders and to interact with fairness,
dignity and respect to create and protect a
credible business reputation and a working
environment free from harassment and
discrimination.
In line with the code, the Group recruits and
promotes employees on the basis of their
suitability for the job without any
discrimination on the basis of race, religion,
national origin, colour, gender, age, marital
status, sexual orientation or disability
unrelated to the task at hand.
Employees have been educated about the
responsibility of reporting any actual,
perceived or potential violation of the code to
management. Management bears the overall
responsibility of monitoring compliance with
the code. ArB takes the code seriously and,
where appropriate, employs disciplinary
procedures and/or legal proceedings to
address any transgression.
StAKEHoLdEr coMMunIcAtIonthe Group is committed to timely, consistent,
honest and transparent communication with
all stakeholders and encourages an open
communication culture throughout the
Group. this is carried through to all means of
communication including advertising where
all untruths, concealment or misleading
descriptions are prohibited.
company announcements are released on
SEnS and published in the press, if required.
regular presentations and meetings are held
Corporate governance
| ArB Integrated report 201534
Corporate Governance report continued
with investors and analysts to communicate
the strategy and performance of the Group.
during the year, the Group chief Executive
officer presented the company at several
JSE showcases around the country as well as
at the annual rMB/Morgan Stanley off-Piste
conference. the company also distributes a
bi-annual Investor update newsletter, copies
of which can be downloaded from the
company’s website at www.arbhold.co.za
under the Investor relations section.
Furthermore, the Group chief Executive
officer is available to answer any queries
from stakeholders including institutional
shareholders and industry analysts, and
wherever possible, engages with the financial
media to ensure accurate reporting.
Shareholders are also afforded the
opportunity to put questions to the Board at
the company’s Annual General Meeting.
the Group’s website provides information on
the Group and contains the latest and
historical financial information.
the Group engages the services of Keyter
rech Investor Solutions cc to assist and
advise it with all shareholder communications.
A table on stakeholder engagement can be
found on page 29.
FrAud, BrIBErY, corruPtIon And ILLEGAL ActSthe Group does not engage in or condone any
form of fraud, bribery, corruption or any other
illegal acts in the conduct of its business.
Furthermore, employees are discouraged
from accepting any gifts or favours from
suppliers that obligate them in any way to
reciprocate. the Group’s policy is to actively
pursue and prosecute the perpetrators of any
fraudulent or other illegal activities should
they become aware of any such acts. All
Executive directors, divisional directors and
regional, Branch and Sales Managers are
required to sign a representation letter
annually regarding illegal behaviour.
InSIdEr trAdInGno employee may deal, directly or indirectly,
in ArB shares based on unpublished price
sensitive information regarding the business
or the affairs of the Group.
In addition, comprehensive confidentiality
agreements are in place with the company’s
sponsor, advisors, printers and investor
relations agency.
PoLItIcAL contrIButIonSthe Group does not contribute to any political
parties or politicians.
coMPEtItIon And PrIcInGthe Group supports and encourages free
external and internal competition in all
business units and subsidiaries. All Executive
directors, divisional directors and regional,
Branch and Sales Managers are required to
sign a representation letter annually regarding
anti-competitive behaviour.
LItIGAtIonthe services of external legal advisors are
engaged by the Group when deemed
necessary.
the Board is not aware of any legal or
arbitration proceedings that may have or
have had in the recent past, being at least the
previous 12 months, a material effect on
the financial position of the company or any
of its subsidiaries.
SPonSorGrindrod Bank Limited is the company’s
sponsor and advises the Board on the
interpretation of and compliance with the JSE
Listings requirements and with the review of
all announcements and documentation
required in terms thereof.
ArB Integrated report 2015 | 35
Risk Committee report
rISK MAtrIX
description of risk Level of risk Mitigation strategies
1. Strategic
Business model Major/Moderate Main businesses have robust models, proven effective for more than 20 years
Ensure value proposition remains compelling
Evaluating further ways in which to diversify the business to counter current
tough trading environment
B-BBEE Major/Moderate Evaluating ways to address weakness in current and revised scorecards
Board evaluating alternatives to address the ownership component across all
operating entities
Failed acquisition Low Board approval required for all merger and acquisition activity
retain external advisors where appropriate (attorneys, auditors, sponsor)
to date, acquisitions have been relatively small and successful
2. Financial
trading failure/cash shortage Low operations are profitable and cash generative
ungeared with net cash of r226,8 million on hand
Adequate unutilised bank facilities in place
Fraud Low Strict internal controls
Adequate segregation of duties
Internal and external audit reviews
culture of ethical behaviour
risk committee
the management of the ArB’s risks is a key driver in the way in which we run the business.
For the first time this year we have included a risk matrix as well as a separate risk
committee report.
Strategic
1Financial
2Operational
3Reputational
4Environmental
5
Corporate governance
| ArB Integrated report 201536
Risk Committee report continued
description of risk Level of risk Mitigation strategies
2. Financial continued
credit risk Moderate collections adversely affected by current economic climate but
– Strict credit vetting measures in place
– net bad debt write-offs very low across all businesses
– All divisions now have credit risk insurance
Stock devaluation/loss Moderate Volatility in exchange rates and commodity prices increase risk
Implementation of appropriate stock holding policies to limit exposure
Maintain adequate stock provisions
3. Operational
It system failure Low duplicated fail over servers in place
daily backups with offsite storage
Formal disaster recovery plans in place
Human capital Moderate Incentive and retention mechanisms in place for key staff
ongoing succession planning
Fair and equitable labour practices
Loss of key customer/supplier Low Very low customer concentration (Electrical)
Increase trade with all major customers to reduce potential concentration
risk (Lighting)
Alternative suppliers available across all major product categories
natural disaster Low comprehensive insurance cover in place
Formal disaster recovery plans in place
national branch network/multiple locations reduce the potential impact
Supply chain failure Low Multiple suppliers available for most products
Minimal imported product (Electrical)
Adequate stock holdings maintained
Labour unrest Minor/Moderate Very low levels of union membership, with no union recognition, across the group
Indirect adverse impact on sales, stock availability and deliveries when various
unions go on strike
Product failure Minor only stock and supply compliant products – ArB Electrical, Electro Vroomen,
cEd and Eurolux are all members of SAFEhouse
Back-to-back guarantees with suppliers
terms and conditions specifically exclude special, indirect and/or consequential
damages or loss
Product liability insurance cover maintained
ArB Integrated report 2015 | 37
description of risk Level of risk Mitigation strategies
4. Reputational
Legal non-compliance Low not a contractually driven industry
retain experts (attorneys, sponsor, auditors) to advise as appropriate
All directors and managers required to sign annual undertaking in relation to
illegal and anti-competitive behaviour
Loss of market confidence Low open, honest and timely communication with market
Shares are tightly held
5. Environmental
Environmental impact Low no manufacturing undertaken, operations are restricted to trading and
distribution activities
ongoing engagement with the department of Environmental Affairs regarding the
disposal and recycling of fluorescent and high-intensity discharge lamps (Lighting)
I have pleasure in presenting the risk
committee report for the year ended 30 June
2014.
MEMBErSthe risk committee comprises the following
members:
Simon downes (chairman) – Independent,
non-Executive director;
Alan r Burke – non-executive director and
chairman of the Board;
ralph Patmore – Lead Independent, non-
Executive director;
Gerrit (“Boel”) Pretorius – Independent,
non-Executive director;
Byron nichles* – Group chief Executive
officer; and
William (“Billy”) neasham – Group chief
Executive officer and acting Group
Financial director.
* resigned 31 october 2014
In addition to the above members, the chief
Executive officers of the Electrical and
Lighting divisions attend risk committee
meetings by invitation. the Group’s It
director is also invited, from time to time, to
present on matters relating to It governance.
roLE oF tHE rISK coMMIttEEthe risk committee operates in terms of a
formal charter approved by the Board.
overall responsibility for the identification,
evaluation, monitoring and management of
risk vests with executive management. the
risk committee provides independent and
objective oversight of the information
presented by executive management and
reviews the risk philosophy, strategy and
policies recommended by executive
management.
the specific responsibilities of the risk
committee include:
Assisting the Board in discharging its
duties relating to corporate accountability
and the associated risks. risk in the widest
sense includes, but is not necessarily
limited to, strategic risk, financial risk,
operational risk, reputational risk and
environmental risk; and
Assisting the Board in discharging its
duties relating to It governance.
MEEtInGS oF tHE rISK coMMIttEEduring the year the risk committee met four
times, which the directors believe is sufficient
for the purpose of discharging the committee’s
responsibilities. Additional meetings are
convened as required. details of directors’
attendance at the risk committee meetings
are set out below.
Director Attendance
Ar Burke* 4/4
St downes** 4/4
Wr neasham (cEo and Acting
Financial director) 4/4
B nichles (cEo)+ 1/1
rB Patmore**# 4/4
G Pretorius** 4/4
* non-Executive.** Independent non-Executive.# Lead Independent director.+ resigned 31 october 2014.
concLuSIonthe committee is of the opinion that it has
adequately discharged its obligations during
the course of the year. Furthermore, the
committee is of the opinion that all material
risks facing the Group have been identified,
quantified and, where possible, mitigated as
prescribed by the charter.
Simon Downes
risk committee chairman
Corporate governance
| ArB Integrated report 201538
Audit Committee report
I have pleasure in presenting the Audit
committee report for the year ended 30 June
2015.
APPoIntMEntthe Audit committee is appointed at each
Annual General Meeting as required by the
companies Act 71 of 2008 (“the Act”) Part d,
Section 94. this section requires the Audit
committee to prepare a report to be included
in the annual financial statements for that
financial year, specifying the matters set
out below. the JSE Listings requirements
require all listed companies to appoint an
Audit committee that “must fulfil the role as
set out in the King code”.
MEMBErSthe Audit committee comprises the following
members, who were appointed by the
shareholders at the company’s Annual
General Meeting held on 22 october 2014:
Simon downes (chairman) – Independent,
non-Executive director;
ralph Patmore – Independent, non-
Executive director; and
Gerrit (“Boel”) Pretorius – Independent,
non-Executive director.
In addition to the above members, the Group
chief Executive officer, Group Financial
director, Group Internal Audit Manager and
the external auditors attend Audit committee
meetings by invitation.
tHE AudIt coMMIttEE rEPortthe Act requires the Audit committee to
prepare a report which covers the following
matters:
describe how the Audit committee carried
out its functions;
State whether the committee is satisfied
that the auditor was independent of the
company; and
comment as appropriate on the accounting
practices and the internal financial controls
of the company.
dutIES oF tHE AudIt coMMIttEEA formal charter tasks the Audit committee
with reviewing the interim results and annual
financial statements and associated
announcements as well as with understanding
management’s accounting processes and
policies and the external auditor’s involvement
in these processes.
the specific responsibilities of the Audit
committee include:
Internal control – reviewing the adequacy
and effectiveness of management
information and internal controls to
support the Board in the discharge of its
responsibilities. this includes monitoring
management’s responsibility for the
security of the information systems and
applications and the contingency plans for
processing financial information in the
case of a system breakdown;
Financial reporting – reviewing the
accounting policies adopted or any changes
made and the measures introduced by
management to enhance the accuracy and
fair presentation of all matters proposed
for inclusion in the annual financial
statements and any other reports prepared
with reference to the affairs of the company
for external distribution or publication,
including those required by any regulatory
or supervisory authority;
External audit – recommending the
appointment of external auditors for
approval by the shareholders, reviewing
their performance and monitoring their
independence. the Audit committee also
sets the principles for recommending the
external auditors to perform non-audit
services;
Financial director – evaluating the
performance of the Financial director
during the year under review and providing
feedback in this regard to the remuneration
committee;
Internal audit – overseeing the internal
audit function which is responsible
for performing independent assessments
of the adequacy and effectiveness of
the Group’s internal controls and
operations as well as monitoring each
branch’s compliance with Health and
Safety requirements. the internal audit
department is further tasked with ensuring
that Group policies and procedures are
adequate, effective, appropriate and
consistently applied across the Group;
Sustainability and integrated reporting –
overseeing the Group’s sustainability and
integrated reporting and advising the
Board on the need to engage an external
assurance provider to review the accuracy
and completeness of such reporting; and
risk management and It governance –
although a separate risk sub-committee
exists, the Audit committee liaises with the
risk committee insofar as financial reporting
risks, internal controls, fraud, It governance
and in respect of any areas of overlap. In
accordance with the recommendations of
King III, It governance is addressed as a
separate agenda item at risk committee
meetings and reported back on at Board
meetings.
ActIVItIES And FIndInGS oF tHE AudIt coMMIttEEWith regard to the above:
the scope, independence and objectivity of
the external auditors was reviewed;
the external audit firm, PKF durban, is in
the Audit committee’s opinion, independent
of the company and has been proposed to
the shareholders for approval to be re-
appointed as the company’s auditor for the
2015 financial year;
on an ongoing basis, the Audit committee
reviews and approves the fees proposed by
the external auditor;
to the best of the Audit committee’s
knowledge and belief, the appointment of
the external auditor complies with the Act,
and with all other legislation relating to the
appointment of external auditors;
the nature and extent of non-audit services
provided by the external auditor have been
reviewed to ensure that the fees for such
services do not become so significant as to
call into question their independence;
the nature and extent of non-audit services
have been defined and pre-approved;
nothing has come to the attention of the
Audit committee to indicate that there has
been a material breakdown in the systems
of internal control during the year;
ArB Integrated report 2015 | 39
the Audit committee is satisfied with the
appropriateness of the expertise and
experience of the Financial director and
his performance during the year;
the Audit committee is satisfied with the
Sustainability report and the corporate
Governance report featured on pages 23
and 30 of this integrated annual report and
recommended them to the Board for
approval; and
As at the date of this report, no complaints
have been received relating to the accounting
practices of the company or to the content
or auditing of the company’s financial
statements, or to any related matter.
during the year the Audit committee met
three times, which the directors believe is
sufficient for the purpose of discharging the
committee’s responsibilities. Additional
meetings are convened as required. details of
directors’ attendance at the Audit committee
meetings held during the year are set out
below.
Director Attendance
St downes** 3/3
Wr neasham (cEo and
Acting Group Financial
director) – by invitation 3/3
B nichles (cEo) – by invitation+ 1/1
rB Patmore**# 3/3
G Pretorius** 3/3
* non-Executive.** Independent non-Executive.# Lead Independent director.+ resigned 31 october 2014.
concLuSIonthe Audit committee has satisfied itself that
the company’s internal control environment,
disciplines and procedures are adequate to
comply with the Act, to minimise the financial
risks of the Group, and to provide adequate
information in a timeous manner to enable
management and the Audit committee to
fulfil their responsibilities.
the Audit committee is of the opinion that its
objectives were met during the year under
review.
Simon Downes
Audit committee chairman
Corporate governance
| ArB Integrated report 201540
Remuneration and Nominations Committee report
I have pleasure in presenting the committee
report for the year ended 30 June 2015.
MEMBErSthe committee comprises the following
members:
ralph Patmore (chairman) – Independent,
non-Executive director;
Alan r Burke – non-Executive director
Simon downs – Independent, non-Executive
director; and
Gerrit (“Boel”) Pretorius – Independent,
non-Executive director.
In addition to the above members, the Group
chief Executive officer and the Group
Financial director attend committee
meetings by invitation, but may not participate
in any discussions regarding their own
remuneration.
roLE oF tHE coMMIttEEthe committee operates under formal terms
of reference in terms of which it is required
to meet at least twice a year in order to fulfil
the functions assigned to it.
the chairman of the Board is not eligible for
appointment as chairman of the committee,
but will preside as chairman when the
committee fulfils its oversight responsibilities
on nomination matters and Board/director
interactions.
rEMunErAtIon rESPonSIBILItIES to provide a mandate for the Group’s
annual remuneration increases;
to ensure that the directors and senior
executives are appropriately remunerated;
Authority for matters relating to employee
benefits; and
Approval of short and long-term employee
incentive schemes at both executive and
divisional level.
rEMunErAtIon PoLIcY And PHILoSoPHYthe company’s philosophy is to set appropriate
remuneration and profit incentive levels,
taking into account levels of responsibility,
market remuneration surveys and the need
to attract, motivate and retain directors,
executives and individuals of a high calibre.
the Group’s remuneration policy is endorsed
annually, by means of a non-binding advisory
vote, by shareholders.
Executive Directors’ remunerationExecutive remuneration comprises three
components:
Guaranteed pay, specifically a monthly
basic cash salary including employee
benefits such as retirement funding and
medical aid contributions;
A cash-based short-term or performance
incentive, linked to the higher of a
predetermined level of profit growth or a
minimum required return on opening
equity which, if achieved, is paid annually
after finalisation of the Group’s audited
results; and
A long-term incentive, being the cash-
settled share appreciation rights plan.
Executive directors’ guaranteed pay is
reviewed annually by the committee. Salaries
are compared to available industry surveys
and pay levels of other South African
companies to ensure sustainable performance
and market competitiveness. the individual
salaries of directors are reviewed annually in
light of their own performance, experience,
level of responsibility and Group performance.
Executive directors do not receive directors’
fees for attending Board and sub-committee
meetings.
Executive directors’ emoluments for the year
ended 30 June 2015 are detailed in note 25 on
page 78 of the annual financial statements.
otHEr MAttErSthe total remuneration for the year of the
three highest paid employees who are not
directors of the company is set out below:
Employee 1 R3 732 035
Employee 2 R3 703 710
Employee 3 R2 670 201
Total R10 105 946
Directors’ service contractsExecutive directors are appointed in terms of
written letters of appointment which endure
indefinitely, are subject to termination on
either one or two months’ notice and which
contain a restraint of trade undertaking.
Succession planningthe committee reviews the Group’s
succession plan and communicates any areas
of concern to the risk committee.
Non-Executive Directors’ feesnon-Executive directors are appointed in
terms of written letters of appointment. In
accordance with the recommendations of
King III and international best practice, non-
Executive directors’ fees comprise a
combination of a fixed annual retainer and
meeting attendance fees. non-Executive
directors do not receive short-term incentives
nor do they participate in any long-term
incentive schemes.
the fees paid to non-Executive directors for
the year ended 30 June 2014 are detailed in
note 25 on pages 78 and 79 of the annual
financial statements. these fees were
approved by the committee, the Board of
directors and shareholders at the company’s
last Annual General Meeting. At the Annual
General Meeting to be held on 12 november
2015 shareholders will be asked to pass a
special resolution to approve the fees of non-
Executive directors for the year ending
30 June 2016 as set out in the accompanying
notice of Annual General Meeting.
noMInAtIon rESPonSIBILItIESthe committee is responsible for regularly
reviewing and making recommendations on
the Group’s Board structure and the size and
composition of the Board. the committee
furthermore ensures that an appropriate
balance exists between Executive, non-
Executive and Independent directors and
considers and approves the classification of
directors as being independent, in line with
the King code. It assists with the identification
and nomination of new directors and
appointment by the Board and/or shareholders
and oversees induction and training of
directors.
ArB Integrated report 2015 | 41
Meetings of the committeeduring the year the committee met three
times, which the directors believe is sufficient
for the purpose of discharging the committee’s
responsibilities. Additional meetings are
convened as required. details of directors’
attendance at the remuneration committee
meetings held during the year are set out
below.
Director Attendance
Ar Burke* 3/3
St downes** 3/3
Wr neasham (cEo and
Acting Group Financial
director) – by invitation 3/3
B nichles (cEo) – by invitation+ 1/1
rB Patmore**# 3/3
G Pretorius** 2/3
* non-Executive.** Independent non-Executive.# Lead Independent director. + resigned 31 october 2014.
Ralph Patmore
remuneration and nomination
committee chairman
Corporate governance
| ArB Integrated report 201542
Social and Ethics Committee report
I have pleasure in presenting the Social and
Ethics committee report for the year ended
30 June 2015.
MEMBErSthe Social and Ethics committee comprises
the following members:
Gerrit (“Boel”) Pretorius (chairman) –
Independent, non-Executive director;
Simon downes – Independent, non-
Executive director;
Shannon Bester – Financial director of
ArB Electrical Wholesalers; and
nellie Mlambo – Hr Manager of ArB
Electrical Wholesalers.
In addition to the above members, the Group
Financial director attends Social and Ethics
committee meetings by invitation.
roLE oF tHE SocIAL And EtHIcS coMMIttEEthe committee is governed by a formal charter
and its primary objective is to provide oversight
of the impact which the company’s activities
have on the environment, consumers,
employees, communities, stakeholders and
all other members of the public by recognising
that the ultimate objective of managing
organisational integrity is to build an ethical
corporate culture.
the specific responsibilities of the Social and
Ethics committee include, inter alia:
to build and sustain an ethical corporate
culture in the Group;
to promote good corporate citizenship;
to care for the environment, health and
public safety, including the impact of the
Group’s activities and of its products;
to monitor the Group’s labour services and
employment services; and
to ensure that the Group’s code of conduct
and ethics-related policies are complied
with.
ActIVItIES And MEEtInGS oF tHE SocIAL And EtHIcS coMMIttEEduring the year, the Social and Ethics
committee considered or reviewed the
following aspects:
development of a Group Intranet;
the Group’s Health and Safety compliance
levels;
the various subsidiaries’ B-BBEE
scorecards and transformation strategies;
the ArB Electrical bursary scheme;
the Group’s donations and cSI initiatives;
ArB Electrical’s learnership programme;
and
the various subsidiaries’ environmental
impact.
during the year the Social and Ethics
committee met twice, which the directors
believe is sufficient for the purpose of
discharging the committee’s responsibilities.
Additional meetings are convened as
required. details of directors’ attendance at
the Social and Ethics committee meetings
held during the year are set out below.
Member Attendance
St downes* 2(2)
G Pretorius* 2(2)
SL Bester 2(2)
n Mlambo 1(1)
Wr neasham (cEo and
acting Group Financial
director)
– by invitation 2(2)
* Independent non-Executive.
Gerrit (“Boel”) Pretorius
Social and Ethics committee chairman
5Consolidatedannual financial statements
The reports and statements set out below comprise the consolidated annual financial statements
presented to the shareholders:
44 Independentauditor’sreport
45 Directors’responsibilitiesandapproval
45 StatementoftheCompanySecretary
46 Directors’report
50 Statementsoffinancialposition
51 Statementsofcomprehensiveincome
52 Statementsofchangesinequity
53 Statementsofcashflows
54 Accountingpolicies
63 Notestotheannualfinancialstatements
Consolidated annual financial statements
| ARB Integrated report 201544
Independentauditor’sreport
To The ShAReholdeRS of ARB holdIngS lImITed And ITS SuBSIdIARIeSWe have audited the consolidated and separate financial statements
of ARB holdings limited and its subsidiaries set out on pages 50 to 93,
which comprise the statements of financial position at 30 June 2015,
the statements of comprehensive income, the statements of changes
in equity and the statements of cash flows for the year then ended and
the notes comprising a summary of significant accounting policies
and other explanatory information.
dIRecToRS’ ReSponSIBIlITy foR The fInAncIAl STATemenTSThe company’s directors are responsible for the preparation and fair
presentation of these consolidated and separate financial statements
in accordance with International financial Reporting Standards and
the requirements of the companies Act of South Africa, and for such
internal control as the directors determine is necessary to enable the
preparation of consolidated and separate financial statements that
are free from material misstatements, whether due to fraud or error.
AudIToR’S ReSponSIBIlITyour responsibility is to express an opinion on these consolidated and
separate financial statements based on our audit. We conducted our
audit in accordance with International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance whether the
consolidated and separate financial statements are free of material
misstatement.
An audit includes performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgement, including the assessment
of the risks of material misstatement of the annual financial statements,
whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
opInIonIn our opinion, the consolidated and separate financial statements
fairly present, in all material respects, the consolidated and separate
financial position of ARB holdings limited and its subsidiaries at
30 June 2015, and its consolidated and separate financial performance
and consolidated and separate cash flows for the year then ended in
accordance with International financial Reporting Standards and the
requirements of the companies Act of South Africa.
oTheR RepoRTS RequIRed By The compAnIeS AcTAs part of our audit of the consolidated and separate financial
statements for the year ended 30 June 2015, we have read the
directors’ report, the Audit committee’s report and the statement of
the company Secretary for the purpose of identifying whether there
are material inconsistencies between these reports and the audited
consolidated and separate financial statements. These reports are the
responsibility of the respective preparers. Based on reading these
reports we have not identified material inconsistencies between these
reports and the audited consolidated and separate financial
statements. however, we have not audited these reports and,
accordingly, do not express an opinion on these reports.
PKF Durban
Registered Auditors
chartered Accountants (SA)
practice number: 906352e
partner: Tc marti-Warren RA cA(SA)
durban
21 August 2015
ARB Integrated report 2015 | 45
Directors’responsibilitiesandapproval
The directors are required by the companies Act of South Africa to
maintain adequate accounting records and are responsible for the
content and integrity of the annual financial statements and related
financial information included in this report. It is their responsibility to
ensure that the consolidated annual financial statements satisfy the
financial reporting standards as to form and content and present fairly
the consolidated and separate statement of financial position, results
of operations and business of the group, and explain the transactions
and financial position of the business of the group at the end of the
financial year. The consolidated annual financial statements are
based upon appropriate accounting policies consistently applied
throughout the group and supported by reasonable and prudent
judgements and estimates.
The directors acknowledge that they are ultimately responsible for the
system of internal financial control established by the group and place
considerable importance on maintaining a strong control environment.
To enable the directors to meet these responsibilities, the Board sets
standards for internal control aimed at reducing the risk of error or loss
in a cost effective manner. The standards include the proper delegation
of responsibilities within a clearly defined framework, effective
accounting procedures and adequate segregation of duties to ensure an
acceptable level of risk. These controls are monitored throughout the
group and all employees are required to maintain the highest ethical
standards in ensuring the group’s business is conducted in a manner
that in all reasonable circumstances is above reproach.
The focus of risk management in the group is on identifying,
assessing, managing and monitoring all known forms of risk across
the group. While operating risk cannot be fully eliminated, the group
endeavours to minimise it by ensuring that appropriate infrastructure,
controls, systems and ethical behaviour are applied and managed
within predetermined procedures and constraints.
The directors are of the opinion, based on the information and
explanations given by management and the internal auditors, that the
system of internal control provides reasonable assurance that the
financial records may be relied on for the preparation of the
consolidated and separate annual financial statements. however, any
system of internal financial control can provide only reasonable, and
not absolute, assurance against material misstatement or loss. The
going-concern basis has been adopted in preparing the financial
statements. Based on forecasts and available cash resources the
directors have no reason to believe that the group will not be a going
concern in the foreseeable future. The consolidated financial
statements support the viability of the group.
The financial statements have been audited by the independent auditing
firm, pKf durban, who have been given unrestricted access to all
financial records and related data, including minutes of all meetings of
shareholders, the Board of directors and committees of the Board. The
directors believe that all representations made to the independent
auditor during the audit were valid and appropriate. The external
auditors’ unqualified audit report is presented on page 44.
These annual financial statements have been prepared under the
supervision of the Acting group financial director, WR neasham cA(SA).
The consolidated and separate annual financial statements as set out
on pages 46 to 93 were approved by the Board on 21 August 2015 and
were signed on their behalf by:
AR Burke WR Neasham
non-executive chairman group chief executive officer
StatementoftheCompanySecretary
I certify, to the best of my knowledge and belief, that the requirements as stated in section 88(2) of the companies Act of South Africa, have
been met and that all returns, as required of a public company in terms of the aforementioned Act, have been submitted to the companies and
Intellectual property commission and that such returns are true, correct and up to date.
M Louw
company Secretary
21 August 2015
Consolidated annual financial statements
| ARB Integrated report 201546
Directors’report
The directors present their report for the year ended 30 June 2015.
1. nATuRe of BuSIneSS And opeRATIonS ARB holdings ltd is a holding and investment company which
owns fixed property and vehicles for letting, as well as
investments in closely related trading and distribution
businesses.
ARB electrical Wholesalers (pty) ltd together with its subsidiaries,
a majority owned subsidiary (74%), is the company’s largest
operating subsidiary. It is a black empowered electrical wholesaler
operating in southern and South Africa offering a wide range of
locally manufactured and imported products including power and
instrumentation cabling, overhead line hardware and conductor,
insulators, transformers and general electrical contracting
materials. clients range across large and heavy industry,
parastatals, major construction groups, mining houses and
electrical contractors.
ARB IT Solutions (pty) ltd, a wholly-owned subsidiary, services
all the electrical division’s IT requirements and sells computer
hardware, software support services and an accounting
management system known as Xact.
ARB global (pty) ltd, a wholly-owned subsidiary, sells a range
of locally manufactured and imported electrical products across
South African borders.
eurolux (pty) ltd, a majority owned subsidiary (60%), imports
and distributes electrical light fittings, lamps and related
electrical accessories principally in South Africa.
ced – consolidated electrical distributor (pty) ltd, a wholly
owned subsidiary, is the distributor for the chInT low voltage
products and horizon plugs and socket range in the SAdc region.
2. fInAncIAl ReSulTS The operating results and statement of financial position of the
company and the group are fully set out in the attached financial
statements and do not in our opinion require any further
comment.
3. goIng conceRn The consolidated and separate annual financial statements have
been prepared on the basis of accounting policies applicable to
a going concern. This basis presumes that funds will be
available to finance future operations and that the realisation of
assets and settlement of liabilities, contingent obligations and
commitments will occur in the ordinary course of business.
4. evenTS AfTeR RepoRTIng dATe The directors are not aware of any significant events which
occurred subsequent to year-end and up to date of this report.
5. dIRecToRS’ InTeReST In conTRAcTS no material contracts in which directors have an interest were
entered into during the year other than the transactions detailed
in note 27 to the annual financial statements.
6. ShARe cApITAl Authorisedsharecapital: The authorised share capital amounts to R100 000, being
1 000 000 000 ordinary shares of 0,01 cents each. There were no
changes in the authorised share capital during the year under review.
Issuedsharecapital: The issued share capital amounts to R23 500, being 235 000 000
ordinary shares of 0,01 cents each. There were no changes in
the issued share capital during the year under review.
7. mAnAgemenT By ThIRd And RelATed pARTIeS neither the business of the company nor its subsidiaries, nor any
part thereof, has been managed by a third person or a company
in which a director had an interest during the year under review.
8. dIvIdendS A final dividend was declared and paid to shareholders during
the year under review of R70 735 000 (30,10 cents per share)
[2014: R61 570 000 (26,20 cents per share)].
Subsequent to year-end, the Board declared a final dividend to
shareholders of 20,1 cents per share. This is in line with the
company’s dividend policy to distribute up to a maximum of
forty per cent of net profit after taxation, taking into account
distributable reserves and cash available for distribution.
The Board also resolved to declare a special dividend of
10,0 cents per share.
9. dIRecToRS The directors of the company during the year and to the date of
this report are as follows:
AR Burke non-executive chairman
WR neasham group chief executive officer and acting group
financial director
ST downes Independent non-executive director
RB patmore lead Independent non-executive director
g pretorius Independent non-executive director
B nichles Resigned 31 october 2014
JR modise Resigned 12 february 2015
10. SecReTARy The company Secretary is m louw, whose business and postal
address are the following:
11 larch nook, Zwartkop X4, centurion, 0046
po Box 23305, gezina, 0031
ARB Integrated report 2015 | 47
11. SuBSIdIARIeS
Issued capital
(R)
%held Numberofsharesheld
name and nature of business 2015 2014 2015 2014
Subsidiaries of ARB Holdings Ltd
ARB Electrical Wholesalers (Pty) Ltd 10 000 74 74 7 400 7 400
(co. reg. 2004/012797/07)
(electrical wholesaler)
ARB IT Solutions (Pty) Ltd 100 100 100 100 100
(co. reg. 2007/017066/07)
(IT service provider)
ARB Global (Pty) Ltd 100 100 100 100 100
(co. reg. 2008/008202/07)
(Import/export electrical wholesaler)
Eurolux (Pty) Ltd 1 900 60 60 1 140 1 140
(co. reg. 2000/019019/07)
(Import/export lighting wholesaler)
CED – Consolidated Electrical Distributor
(Pty) Ltd 120 100 100 120 120
(co. reg. 2012/185983/07)
(Import/export electrical wholesaler)
Subsidiaries of ARB Electrical Wholesalers (Pty) Ltd
Industrial Cable Suppliers (Pty) Ltd 184 100 100 184 184
(co. reg. 2005/040265/07)
(electrical wholesaler – dormant)
Elektro Vroomen (Pty) Ltd 3 000 100 100 2 000 2 000
(co. reg. 1959/001860/07)
(electrical wholesaler)
Subsidiaries of Eurolux (Pty) Ltd
Cathay Lighting International (Pty) Ltd 120 100 100 120 120
(co. reg. 2004/014460/07)
(Import/export lighting wholesaler)
N-Ex Trading (Pty) Ltd 102 100 100 102 102
(co. reg. 2005/028424/07)
(electronic equipment trader – dormant)
Njabulo Cables (Pty) Ltd 120 100 100 120 120
(co. reg. 2007/020504/07)
(Import/export electrical wholesaler – dormant)
2015 2014
The company’s share of the aggregate profits after tax from subsidiaries 92 399 140 97 434 053
All subsidiaries are incorporated in the Republic of South Africa.
Consolidated annual financial statements
| ARB Integrated report 201548
Directors’reportcontinued
12. AudIToRS pKf durban, chartered Accountants (SA), Registered Auditors will continue in office as auditors of the company in accordance with
section 90(1) of the companies Act of South Africa, subject to shareholder approval at the upcoming Annual general meeting.
13. dIRecToRS’ ShAReholdIng In The ISSued ShARe cApITAl of The compAny
No.ofsharesheld
directorDirect
beneficiallyIndirect
beneficiallyPercentage
held
2015
Alan R Burke (chairman)* 18 523 077 106 548 208 53,2
Byron nichles (resigned 31 october 2014) – 2 550 000 1,1
Simon downes*# – 600 000 0,3
William neasham (ceo) 4 861 539 75 000 2,1
clinton cockerell (resigned 31 July 2015)** 5 724 728 24 000 2,4
Jason Burke** 67 600 – –
derrick muller*** 1 000 000 – 0,4
Blayne Burke** 67 600 – –
Shannon Bester** 10 000 – –
2014
Alan R Burke* (chairman) 18 523 077 100 519 313 50,7
Byron nichles (ceo) – 2 550 000 1,1
Simon downes*# – 600 000 0,3
William neasham (group financial director) 4 861 539 75 000 2,1
clinton cockerell** 11 753 846 24 000 5,0
Jason Burke** 65 200 – –
derrick muller*** 2 170 000 – 0,9
Blayne Burke** 65 200 – –
Shannon Bester** 10 000 – –
* non-executive.** director of subsidiary, ARB electrical Wholesalers (pty) ltd.*** director of subsidiary, ARB IT Solutions (pty) ltd.# Independent.
no shares were traded by any director from 30 June 2015 until the date of this report.
14. BoRRoWIngS on behalf of the group, the directors have established credit
facilities with various financial institutions for use by the
company and its subsidiary companies. The directors did not
exceed any authorised levels of borrowings during the year
under review.
15. SpecIAl ReSoluTIonS The following special resolutions were passed by the company
during the year under review:
Specialresolution1:GeneralauthoritytorepurchaseCompanyshares
ReSolved ThAT the directors of the company be and are
hereby authorised, by way of a general authority, to repurchase
on behalf of the company and/or any of its subsidiaries, ordinary
shares issued by the company, in accordance with the
companies Act, and in particular, subject to section 48(8)(b)
thereof, the company’s memorandum of Incorporation, as
amended or substituted, and the listings Requirements of the
JSe, and provided that:
any such acquisition of ordinary shares shall be effected
through the order book operated by the JSe trading system
and done without any prior understanding or arrangement
between the company and the counter-party;
this general authority shall only be valid until the company’s
next Annual general meeting, provided that it shall not extend
beyond 15 months from the date of the passing of this special
resolution;
ARB Integrated report 2015 | 49
an announcement setting out such details as may be required
in terms of the listings Requirements of the JSe will be
published on SenS once the company or any of its subsidiaries
has acquired ordinary shares constituting, on a cumulative
basis, 3% of the initial number of ordinary shares in issue as at
the time of the general authority was granted and for each 3%
in aggregate of the initial number of shares acquired thereafter;
in terms of the general authority, the acquisition of ordinary
shares in any one financial year may not exceed, in aggregate,
20% of the company’s issued share capital of that class, at the
time the approval is granted, and the acquisition of shares by
a subsidiary of the company, in any one financial year, may
not exceed, in aggregate, 10% of the number of issued shares
of the company of that class;
in determining the price at which the company’s ordinary shares
are acquired by the company and/or any of its subsidiaries in
terms of this general authority, the maximum premium at which
such ordinary shares may be acquired will be 10% of the
weighted average market price at which such ordinary shares
are traded on the JSe, as determined over the five business days
immediately preceding the date of the acquisition of such
ordinary shares by the company and/or any of its subsidiaries;
a resolution shall be passed by the Board of directors that it
has authorised the repurchase, that the company and its
subsidiaries have passed the solvency and liquidity tests as
required by section 46 of the companies Act and that, since
the test was performed, there have been no material changes
to the financial position of the company and its subsidiaries;
the company will only appoint one agent to effect any
repurchase(s) on its behalf; and
the company and/or its subsidiaries will not acquire the
company’s shares during a prohibited period as defined in
paragraph 3.67 of the listings Requirements of the JSe unless
they have in place a repurchase programme where the dates
and quantities of securities to be traded during the relevant
period are fixed (not subject to any variation) and full details of
the programme have been disclosed in an announcement on
SenS prior to the commencement of the prohibited period.
Specialresolution2:Non-ExecutiveDirectors’remunerationfortheyearending30June2015
ReSolved ThAT the remuneration of non-executive directors,
in the form of fees for their services as directors, for the year
ending 30 June 2015 as set out below, be and is hereby approved
as contemplated in section 66(9) of the companies Act:
Chairman of the Board
Retainer of R233 200 per annum
R26 500 per Board meeting chaired
R10 600 per sub-committee meeting attended
Lead Independent Director
Retainer of R167 500 per annum
R10 600 per Board or sub-committee meeting attended
Non-Executive Director
Retainer of R146 300 per annum
R10 600 per Board or sub-committee meeting attended
Sub-committee Chairman
R15 900 per sub-committee meeting chaired
Specialresolution3:Financialassistanceforsubscriptionofsecurities
ReSolved ThAT the company be and is hereby authorised, in
terms of a general authority contemplated in section 44(3)(a)(ii)
of the companies Act for a period of two years from the date of
this resolution, to provide direct or indirect financial assistance
by way of a loan, guarantee, the provision of security or
otherwise as defined in section 44 of the companies Act to any
person for the purpose of, or in connection with, the subscription
of any option, or any securities, issued or to be issued by the
company or a related or inter-related company, or the purchase
of any securities of the company or a related or inter-related
company, subject to the Board of directors of the company
being satisfied that:
(i) pursuant to section 44(3)(b)(i) of the companies Act,
immediately after providing such financial assistance, the
company would satisfy the solvency and liquidity test (as
contemplated in section 4(1) of the companies Act);
(ii) pursuant to section 44(3)(b)(ii) of the companies Act, the
terms under which such financial assistance is proposed
to be given are fair and reasonable to the company; and
(iii) conditions or restrictions with respect to the granting of
such financial assistance set out in the company’s
memorandum of Incorporation and/or listings
Requirements of the JSe have been complied with.
Specialresolution4:Financialassistancetorelatedorinter-relatedcompaniesandcorporations
ReSolved ThAT the company be and is hereby authorised, in
terms of a general authority contemplated in section 45(3)(a)(ii)
of the companies Act for a period of two years from the date of
this resolution, to provide direct or indirect financial assistance
as defined in section 45(1) of the companies Act to a related or
inter-related company or corporation, subject to the Board of
directors of the company being satisfied that:
a) pursuant to section 45(3)(b)(i) of the companies Act,
immediately after providing such financial assistance, the
company would satisfy the solvency and liquidity test (as
contemplated in section 4(1) of the companies Act);
b) pursuant to section 45(3)(b)(ii) of the companies Act, the
terms under which such financial assistance is proposed to
be given are fair and reasonable to the company; and
c) any conditions or restrictions with respect to the granting of
such financial assistance set out in the company’s
memorandum of Incorporation and/or the listings
Requirements of the JSe have been complied with.
Consolidated annual financial statements
| ARB Integrated report 201550
at 30 June 2015
Statementsoffinancialposition
Group Company
figures in Rand note(s) 2015 2014 2015 2014
Assets
Non-current assets
Investment property 3 – – 179 687 503 163 230 732
property, plant and equipment 4 221 671 994 205 525 741 4 290 797 7 697 782
Intangible assets 5 83 658 801 83 971 012 – –
Investment in subsidiaries 6 – – 78 007 720 78 007 720
deferred lease income 8 – – 2 043 602 –
deferred taxation 15 8 148 861 13 188 062 – –
313 479 656 302 684 815 264 029 622 248 936 234
Current assets
Inventory 7 387 972 884 391 348 367 – –
Trade and other receivables 9 351 345 146 341 923 670 161 620 10 515
Taxation overpaid 199 766 122 403 – –
deferred lease income 8 328 674 – – –
loans receivable 17 – – 89 430 136 72 702 134
cash and cash equivalents 10 226 780 359 197 583 559 16 510 730 546 518
966 626 829 930 977 999 106 102 486 73 259 167
Total assets 1 280 106 485 1 233 662 814 370 132 108 322 195 401
Equity and liabilities
Equity and reserves
Share capital 11 23 500 23 500 23 500 23 500
Share premium 116 149 999 116 149 999 116 149 999 116 149 999
Revaluation reserve 12 70 302 276 60 100 099 71 313 740 62 061 693
capital reserve 12 – – 26 234 082 26 234 082
Accumulated profits 582 845 318 536 121 874 104 235 155 94 072 870
Attributable to ARB ordinary shareholders 769 321 093 712 395 472 317 956 476 298 542 144
non-controlling interest 216 490 148 199 838 706 – –
985 811 241 912 234 178 317 956 476 298 542 144
Non-current liabilities
deferred lease payments 18 980 758 – – –
deferred taxation 15 38 626 437 34 127 052 19 217 940 15 558 818
39 607 195 34 127 052 19 217 940 15 558 818
Current liabilities
Trade and other payables 16 252 185 446 284 117 924 2 742 322 7 007 821
vendor loan account 13 – 18 466 – –
Taxation payable 2 492 239 2 724 914 220 658 886 590
loans payable 17 – – 29 994 712 200 028
deferred lease payments 18 10 364 440 201 – –
Bank overdraft 10 – 79 – –
254 688 049 287 301 584 32 957 692 8 094 439
Total equity and liabilities 1 280 106 485 1 233 662 814 370 132 108 322 195 401
ARB Integrated report 2015 | 51
for the year ended 30 June 2015
Statementsofcomprehensiveincome
Group Company
figures in Rand note(s) 2015 2014 2015 2014
Revenue 2 150 764 335 2 216 658 993 28 563 462 27 986 940
cost of sales (1 633 459 300) (1 689 708 863) – –
gross profit 517 305 035 526 950 130 28 563 462 27 986 940
other income 4 060 893 4 878 033 19 740 240 15 079 823
overheads (324 838 884) (328 798 592) (7 774 875) (17 128 579)
Profit before interest and taxation 19 196 527 044 203 029 571 40 528 827 25 938 184
dividends received – subsidiary – – 55 524 000 31 200 000
Interest received 21 15 174 969 11 442 210 8 483 804 6 701 478
Interest paid 22 (95 091) (189 316) (2 392 874) (1 965 201)
Profit before taxation 211 606 922 214 282 465 102 143 757 61 874 461
Taxation 23 (58 481 036) (59 708 250) (11 994 425) (8 416 601)
Profit for the year 153 125 886 154 574 215 90 149 332 53 457 860
Other comprehensive income
Items that will not be reclassified into profit or loss
Revaluation of property 13 419 069 (1 347 708) – –
Taxation of other comprehensive income (3 216 892) 890 541 – –
Total other comprehensive income 24 10 202 177 (457 167) – –
Total comprehensive income 163 328 063 154 117 048 90 149 332 53 457 860
Profit for the year attributable to:
non-controlling interests 35 667 442 36 383 323
ARB ordinary shareholders 117 458 444 118 190 892
153 125 886 154 574 215
Total comprehensive income attributable to:
non-controlling interests 35 667 442 36 383 323
ARB ordinary shareholders 127 660 621 117 733 725
163 328 063 154 117 048
Earnings per share
Basic earnings per share (cents) 26.1 49,98 50,29
diluted earnings per share (cents) 26.1 49,98 50,29
headline earnings per share (cents) 26.2 49,99 50,28
diluted headline earnings per share (cents) 26.2 49,99 50,28
dividends per share (cents) 26.4 30,10 26,20
Consolidated annual financial statements
| ARB Integrated report 201552
for the year ended 30 June 2015
Statementsofchangesinequity
figures in RandShare
capitalShare
premiumRevaluation
reserveAccumulated
profits
equity attributable to ARB ordinary shareholders
non-controlling
interest Total
Group
Balance at 1 July 2013 23 500 116 149 999 60 557 266 479 500 982 656 231 747 172 855 383 829 087 130
Total comprehensive income
for the year – – (457 167) 118 190 892 117 733 725 36 383 325 154 117 048
profit for the year – – – 118 190 892 118 190 892 36 383 323 154 574 215
other comprehensive income – – (457 167) – (457 167) – (457 167)
dividends – – – (61 570 000) (61 570 000) (9 400 000) (70 970 000)
Balance at 30 June 2014 23 500 116 149 999 60 100 099 536 121 874 712 395 472 199 838 706 912 234 178
Balance at 1 July 2014 23 500 116 149 999 60 100 099 536 121 874 712 395 472 199 838 706 912 234 178
Total comprehensive income
for the year – – 10 202 177 117 458 444 127 660 621 35 667 442 163 328 063
profit for the year – – – 117 458 444 117 458 444 35 667 442 153 125 886
other comprehensive income – – 10 202 177 – 10 202 177 – 10 202 177
dividends – – – (70 735 000) (70 735 000) (19 016 000) (89 751 000)
Balance at 30 June 2015 23 500 116 149 999 70 302 276 582 845 318 769 321 093 216 490 148 985 811 241
figures in RandShare
capitalShare
premiumRevaluation
reservecapital reserve
Accumulatedprofits Total
Company
Balance at 1 July 2013 23 500 116 149 999 60 560 672 26 234 082 103 686 031 306 654 284
Total comprehensive income
for the yearprofit for the year – – – – 53 457 860 53 457 860
dividends – – – – (61 570 000) (61 570 000)
Transfer from accumulated
profits to revaluation reserve – – 1 501 021 – (1 501 021) –
Balance at 30 June 2014 23 500 116 149 999 62 061 693 26 234 082 94 072 870 298 542 144
Balance at 1 July 2014 23 500 116 149 999 62 061 693 26 234 082 94 072 870 298 542 144
Total comprehensive income
for the year
profit for the year – – – – 90 149 332 90 149 332
dividends – – – – (70 735 000) (70 735 000)Transfer from accumulated
profits to revaluation reserve – – 9 252 047 – (9 252 047) –
Balance at 30 June 2015 23 500 116 149 999 71 313 740 26 234 082 104 235 155 317 956 476
ARB Integrated report 2015 | 53
for the year ended 30 June 2015
Statementsofcashflows
Group Company
figures in Rand note(s) 2015 2014 2015 2014
Cash flows from operating activities
profit for the year 153 125 886 154 574 215 90 149 332 53 457 860
Adjustments for:
Income tax 58 481 036 59 708 250 11 994 425 8 416 601
Amortisation of intangible assets 312 211 440 000 – –
depreciation 11 180 364 11 495 977 855 705 1 512 776
Interest received (15 174 969) (11 442 210) (8 483 804) (6 701 478)
Interest paid 95 091 189 316 2 392 874 1 965 201
loss/(profit) on disposal of property, plant and
equipment 29 150 (57 874) – –
change in fair value of property – – (11 375 467) (1 845 518)
operating lease smoothing 222 247 (396 340) (2 043 602) 3 193 226
dividends received – – (55 524 000) (31 200 000)
Operating cash flow before working capital changes 208 271 016 214 511 334 27 965 463 28 798 668
Working capital changes
decrease/(increase) in inventories 3 375 483 (49 684 287) – –
(Increase)/decrease in trade and other receivables (9 421 476) (30 244 629) (151 105) 332 368
(decrease)/increase in trade and other payables (31 932 478) 9 072 815 (4 265 499) 4 011 433
Cash generated by operating activities 170 292 545 143 655 233 23 548 859 33 142 469
Interest received 15 174 969 11 442 210 8 483 804 6 701 478
Interest paid (95 091) (189 316) (2 392 874) (1 965 201)
dividends received – – 55 524 000 31 200 000
dividends paid (89 751 000) (70 970 000) (70 735 000) (61 570 000)
Income tax paid (52 469 380) (62 176 300) (9 001 235) (9 254 737)
Net cash from operating activities 43 152 043 21 761 827 5 427 554 (1 745 991)
Cash flows from investing activities
Investment property acquired 3 – – (5 081 304) (16 222 259)
property, plant and equipment acquired 4 (15 662 040) (28 767 527) (17 170) (41 963)
proceeds on disposals of property, plant and equipment 1 725 342 4 077 096 2 568 450 2 675 869
Net cash utilised in investing activities (13 936 698) (24 690 431) (2 530 024) (13 588 353)
cash flows from financing activities
loans repaid (18 466) (2 240 808) 29 794 684 (18 969 999)
loans receivable advances – – (16 728 002) (25 998 660)
Net cash utilised in financing activities (18 466) (2 240 808) 13 066 682 (44 968 659)
Increase/(decrease) in cash and cash equivalents 29 196 879 (5 169 412) 15 964 212 (60 303 003)
cash and cash equivalents at beginning of the year 197 583 480 202 752 892 546 518 60 849 521
Cash and cash equivalents at end of the year 10 226 780 359 197 583 480 16 510 730 546 518
Consolidated annual financial statements
| ARB Integrated report 201554
for the year ended 30 June 2015
Accountingpolicies
1. geneRAl InfoRmATIon The annual financial statements are prepared in accordance with International financial Reporting Standards (“IfRS”), the SAIcA
financial Reporting guides as issued by the Accounting practices committee, the financial Reporting pronouncements as issued by the
financial Reporting Standards council, the JSe listings Requirements and the companies Act of South Africa. These policies have been
applied consistently to all years presented, unless otherwise stated.
2. BASIS of pRepARATIon The annual financial statements are prepared on the historical cost basis, except for land and buildings which are measured at fair value,
and incorporate the principal accounting policies listed below.
The preparation of financial statements in conformity with IfRS requires management to make judgements, estimates and assumptions
that may affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent
from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the revision and future
periods if the revision affects both current and future periods. The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial statements, are disclosed in note 2.1.
Adoption of new and revised pronouncements
In the current year, the group has adopted all new and revised Standards and Interpretations as issued by the International Accounting
Standards Board (“IASB”) and the IfRS Interpretations committee that are relevant to its operations and effective for annual reporting
periods beginning on 1 July 2014. The adoption of these new and revised standards and interpretations has not resulted in significant
changes to the group’s accounting policies, except for additional disclosure.
At the date of authorisation of these financial statements for the year ended 30 June 2015, the following IfRSs were adopted:
IfRS Title and details effective
IfRS 2 Share-based payments (Annual Improvements to IfRS 2010 – 2012 cycle) Annual periods commencing on or after 1 July 2014
IfRS 3 Business combinations (Annual Improvements to IfRS 2010 – 2012 cycle) Annual periods commencing on or after 1 July 2014
IfRS 3 Business combinations (Annual Improvements to IfRS 2011 – 2013 cycle) Annual periods commencing on or after 1 July 2014
IfRS 8 operating Segments (Annual Improvements to IfRS 2010 – 2012 cycle) Annual periods commencing on or after 1 July 2014
IfRS 9 financial Instruments (Annual Improvements to IfRS 2010 – 2012 cycle) Annual periods commencing on or after 1 July 2014
IfRS 10 consolidated financial statements – exception to the principle that all
subsidiaries must be consolidated
Annual periods commencing on or after
1 January 2014
IfRS 12 disclosure of interests in other entities – new disclosures required
for Investment entities
Annual periods commencing on or after
1 January 2014
IfRS 13 fair value measurement (Annual improvements to IfRS 2010 – 2012 cycle) Annual periods commencing on or after 1 July 2014
IfRS 13 fair value measurement (Annual improvements to IfRS 2011 – 2013 cycle) Annual periods commencing on or after 1 July 2014
IAS 16 property, plant and equipment (Annual Improvements to IfRSs 2010
– 2012 cycle)
Annual periods commencing on or after 1 July 2014
IAS 24 Related party disclosures (Annual Improvements to IfRS 2010 – 2012 cycle) Annual periods commencing on or after 1 July 2014
IAS 36 Recoverable amount, disclosures of non-financial assets Annual periods commencing on or after 1 January 2014
IAS 38 Intangible Assets (Annual improvements to IfRS 2010 – 2012 cycle) Annual periods commencing on or after 1 July 2014
IAS 40 Investment property (Annual improvements to IfRS 2011 – 2013 cycle) Annual periods commencing on or after 1 July 2014
ARB Integrated report 2015 | 55
New standards and interpretations issued and not yet adopted
The group has not applied the following new, revised or amended pronouncements that have been issued by the IASB as they are not yet
effective for the financial year beginning 1 July 2014 and it is not expected that they will have a material impact on the financial statements.
The Board anticipates that the new standards, amendments and interpretations will be adopted in the group’s consolidated financial
statements when they become effective. The group has assessed, where practicable, the potential impact of all these new standards,
amendments and interpretations that will be effective in future periods.
IfRS Title and details effective
IfRS 9 financial Instruments – finalised version of IfRS 9 to replace
IAS 39 financial Instruments
Annual periods commencing on or after
1 January 2018
IfRS 11 Joint Arrangements – guidance on how to account for the acquisition of an
interest in a joint operation
Annual periods commencing on or after
1 January 2016
IfRS 15 Revenue Annual periods commencing on or after
1 January 2017
IAS 1 presentation of financial Statements – disclosure Initiative Annual periods commencing on or after
1 January 2016
IAS 16 property, plant and equipment – Amendments to IAS 16 and IAS 38 Annual periods commencing on or after
1 January 2016
IAS 16 property, plant and equipment – Amendments to IAS 16 and IAS 41 Annual periods commencing on or after
1 January 2016
IAS 27 consolidated and Separate financial statements – Amendments to IAS 27 to
allow entities to equity account for investments in subsidiaries, joint ventures
and associates in their separate financial statements
Annual periods commencing on or after
1 January 2016
IAS 34 clarification of meaning of disclosure of information “elsewhere” in the
interim report
Annual periods commencing on or after
1 January 2016
IAS 38 Intangible assets – Amendments to IAS 16 and IAS 38 Annual periods commencing on or after
1 January 2016
All applicable standards will be complied with in the financial statements of the period ending 30 June 2016. compliance with these
amendments; revisions and improvements require additional disclosure compared to that required in terms of existing IfRS.
2.1 Accountingestimatesandjudgements The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are as follows:
Key sources of estimation uncertainty
Impairment of inventory
The inventory obsolescence provision is management’s estimate, based on historic sales trends and its assessment of quality and
volume, and the extent to which the merchandise for resale on hand at reporting date will not be sold or will be sold below cost.
Impairment of gross trade receivables
provision is made for doubtful debts based on management’s estimate of the prospect of recovering the debt. Where management
has determined that the recovery of the debt is doubtful, the amount is provided for immediately.
Residual values and useful lives of items of property, plant and equipment
property, plant and equipment is depreciated over its useful life taking into account residual values where appropriate. Assessments
of useful lives and residual values are performed annually after considering factors such as relevant market information, the
condition of the asset and management’s consideration. In assessing the residual values, the group considers the remaining life of
the assets, their projected disposal value and future market conditions.
Consolidated annual financial statements
| ARB Integrated report 201556
for the year ended 30 June 2015
Accountingpoliciescontinued
Vehicles
The group has a policy of utilising all vehicles for a period between 4 and 5 years. It is estimated that vehicles have a residual
value approximating 20% to 60%, depending on their age and nature of use, of their initial purchase price based on historical
sales trends.
Buildings
The group has a policy of utilising all buildings for a period of 50 years. The estimated residual values are determined with
reference to expected proceeds on disposal adjusted for current market prices and trends.
Plant and equipment
due to the specialised nature of the group’s plant and equipment, the residual values of these assets have been estimated to be
nil. The group estimates that the useful life of these assets, being the period of time for which the assets can be utilised without
significant modifications, replacements or improvements, is 5 to 15 years based on the current levels of use and repairs and
maintenance costs incurred.
The estimates are reviewed at each financial year-end and if estimates change the residual values and useful lives are adjusted for
accordingly and the changes accounted for prospectively.
Impairment of intangible assets and goodwill
The group tests for impairment at each reporting date or more frequently if there are indicators that the intangible assets and
goodwill may be impaired.
Software development costs
The group has classified its development costs of its eRp software package as an intangible asset, which it has determined as
having a useful life of 10 years.
Goodwill
The recoverable amount of a cash-generating unit is determined based on value-in-use calculations. for this calculation, the
discounted cash flow method is used, taking into account financial forecasts approved by management over a 5-year period. Key
assumptions applied in value-in-use of the cash-generating unit’s revenue, gross profit and cost forecasts are based on
management’s views and estimates. These cash flows are then discounted and compared to the current carrying value and, if
lower, the assets are impaired to the present value of the cash flows. A discount rate of 20% has been used, taking into account
the level of risk associated with the cash-generating unit.
Trademarks – Eurolux Brand
The recoverable amount of the intangible asset is determined using the relief from royalties methodology. Key assumptions
applied when using this method is the historical growth rate of revenue. The average growth rates used are 10% for the 5-year
period. The discount rate of 20% has been used, based on the cost of equity to eurolux (pty) ltd. The trademark is considered to
have an indefinite useful life as it already has been in existence for over 20 years and it is self-evident that a trademark can
endure for many decades.
Trademarks – Horizon Brand
The recoverable amount of the intangible asset was determined based on cost as the asset was acquired in June 2013. The
trademark was brought into use and fully amortised in the year ended 30 June 2014.
Revaluation of land and buildings and investment properties
The group values the land and buildings and investment properties with reference to current market conditions, recent sales
transactions of similar geographical locations and the present value of future rental income.
Fair value measurement and valuation process
The measurement of non-financial assets at fair value takes into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in
its highest and best use.
The group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
ARB Integrated report 2015 | 57
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair
value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
– level 1: quoted (unadjusted) market prices in active markets for identical assets or liabilities;
– level 2: valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable; and
– level 3: valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
for assets and liabilities that are recognised in the financial statements on a recurring basis, the company determines whether
transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period. Information about the valuation
techniques and inputs used in determining the fair value of various assets and liabilities is disclosed in note 3, 4 and 28.
Critical judgements in applying the Company’s accounting policies
operating lease commitments
The company has entered into leases over properties, motor vehicles and equipment. As management has determined that the
company has not obtained substantially all the risks and rewards of ownership of the properties, motor vehicles and equipment,
the leases have been classified as operating leases and accounted for accordingly.
contingent liabilities
management applies its judgement to advice it receives from its attorneys, advocates and other advisors in assessing if an
obligation is probable, more likely than not, or remote. This judgement application is used to determine if the obligation is
recognised as a liability in the form of a provision or disclosed as a contingent liability.
control over subsidiaries
An assessment of control was performed by the group based on whether the group has the practical ability to direct the relevant
activities unilaterally. In making the judgement, the relative size and dispersion of other vote holders, potential voting rights held
by them or others and rights from other contractual arrangements were considered. After the assessment, the group concluded
that they had a dominant voting interest to direct the relevant activities of the subsidiaries and even a number of vote holders would
be unable to outvote the group, therefore the group has control over the subsidiaries.
operating segments
The segments disclosed in note 31 have been determined by distinguishing the business activities from which the group earns
revenues and incurs expenses. The economic characteristics of the operating segments have been reviewed and operating
segments have been grouped based on the assessment made by the chief executive officer.
2.2 Basisofconsolidation These financial statements are the consolidated financial statements of ARB holdings ltd and entities controlled by it and its
subsidiaries. control is achieved when the group has control of the voting rights of the subsidiary, is exposed to or has rights to variable
returns from its involvement with the subsidiary and has the ability to use its voting rights to affect its returns. If facts and circumstances
indicate that there are changes to one or more of the elements of control, the group shall reassess whether it controls the subsidiary.
The group has 100% control over all subsidiaries except ARB electrical Wholesalers (pty) ltd and eurolux (pty) ltd. The group has
control over the voting rights, power to affect the returns and rights to the returns generated from ARB electrical Wholesalers (pty)
ltd and eurolux (pty) ltd.
Investment in subsidiaries
consolidation of a subsidiary begins from the date the investor gains control of an investee and ceases when the investor loses
control of an investee.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of the acquisition
is measured as the fair value of assets transferred, equity instruments issued and liabilities incurred at the date of exchange.
Intra-group transactions, balances and unrealised gains and losses on transactions between group companies are eliminated.
non-controlling interests in subsidiaries are presented in the consolidated statement of financial position separately from the
equity attributable to equity owners of the parent company. non-controlling shareholders’ interest may initially be measured either
at fair value or at the non-controlling shareholders’ interests proportionate share of the fair value of the acquiree’s identifiable net
Consolidated annual financial statements
| ARB Integrated report 201558
for the year ended 30 June 2015
Accountingpoliciescontinued
assets. The choice of measurement basis is made on each acquisition individually. Subsequent to acquisition, the carrying amount
of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of
subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
When the group ceases to have control of a subsidiary, any retained interest in the entity is re-measured to its fair value at the date
when control is lost with the adjustment being recognised in profit or loss as part of the gain or loss on disposal of the controlling
interest. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the
group had directly disposed of the related assets or liabilities of the subsidiary.
Business combinations
Business combinations are accounted for using the acquisition method. The consideration for acquisition is measured at the fair
values of assets given, liabilities incurred or assumed, and equity instruments issued by the company in order to obtain control of
the acquiree (at the date of exchange). costs incurred in connection with the acquisition are recognised in profit or loss as incurred.
Where a business combination is achieved in stages, previously held interests in the acquiree are re-measured to fair value at the
acquisition date (date the group obtains control) and the resulting gain or loss is recognised in profit or loss. Adjustments are made
to fair values to bring the accounting policies of acquired businesses into alignment with those of the group. The costs of integrating
and reorganising acquired businesses are charged to the post-acquisition profit or loss.
If the initial accounting is incomplete at the reporting date, provisional amounts are recorded. These amounts are subsequently
adjusted during the measurement period, or additional assets or liabilities are recognised when new information about its
existence is obtained during this period.
Goodwill
goodwill on acquisitions comprises the excess of the aggregate of the fair value of the consideration transferred, the fair value of
any previously held interests and the recognised value of the non-controlling interest in the acquiree over the net amounts of the
identifiable assets acquired and liabilities assumed at the acquisition date.
goodwill is carried at cost less accumulated impairment losses. goodwill is tested for impairment annually. gains and losses on
the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
2.3 Property,plantandequipment property, plant and equipment, except for land and buildings, are stated at cost less any accumulated depreciation and any
accumulated impairment losses. depreciation is computed by allocating the depreciable amount of an asset on a systematic basis
over its useful life and is applied separately to each identifiable component. Residual values and useful lives are assessed at the
end of every financial year and the year’s depreciation determined.
The carrying amounts of property, plant and equipment are reviewed annually for an indication whether or not the relevant asset
is impaired. If any such indication exists and where the carrying amount exceeds the estimated recoverable amount, the assets or
cash-generating units are written down to their recoverable amounts. Impairment losses and reversals are recognised directly in
the statement of comprehensive income under the line item “other expenses” unless such reversals relate to previously recognised
revaluation reserves in equity.
land and buildings held for use in the production or supply of goods or services or for administrative purposes are stated in the
statement of financial position at their revalued amounts, being the fair value at the date of revaluation and less any subsequent
accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ
materially from those that would be determined using fair values at the reporting date.
Any revaluation increase arising on revaluation of such land and buildings is credited in equity to the properties’ revaluation reserve
except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss in which case
the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in the carrying amount arising
on the revaluation of such land and buildings is charged to profit or loss to the extent that it exceeds the balance, if any, held in the
properties’ revaluation reserve relating to a previous revaluation of that asset.
property, plant and equipment is depreciated over their useful lives as follows:
plant and equipment 5 to 15 years
office furniture and fittings 6 years
ARB Integrated report 2015 | 59
office equipment 5 to 6 years
computer equipment 3 years
leasehold improvements over the term of the lease
Buildings 50 years
vehicles 4 to 5 years
land is not depreciated.
Where the estimated residual value of an asset is above its carrying value, no depreciation is recognised.
2.4 Intangibleassets Intangible assets acquired separately are shown at historical cost less accumulated amortisation and impairment losses.
An intangible asset is recognised when:
it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
the cost of the asset can be measured reliably.
Intangible assets are initially recognised at cost.
An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit
to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for in respect of these
intangible assets. for all other intangible assets, amortisation is provided on a straight line basis over their useful life.
The carrying value of intangible assets is reviewed for impairment annually or more frequently if there are indicators that the
intangible assets may be impaired.
Intangible assets are amortised over the following periods:
Software development costs 10 years.
Amortisation periods and methods are reviewed annually and are adjusted if appropriate.
2.5 Impairment The carrying amounts of the assets are reviewed at each reporting date to determine whether there is any indication of impairment.
If any such indication exists, or when annual impairment testing for an asset is required, the recoverable amount is estimated as
the higher of the net selling price and value in use.
In assessing value in use, the expected future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risk specific to the asset. An impairment loss is recognised
whenever the carrying amount exceeds the recoverable amount. Impairment losses and reversals of impairment losses are
separately disclosed in the statement of comprehensive income, above the profit before tax sub-total.
for an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is
determined for the cash generating unit to which the asset belongs. An impairment loss is recognised whenever the carrying
amount of the cash generating unit exceeds its recoverable amount.
A previously recognised impairment loss is reversed if there has been a change in the estimate used to determine the recoverable
amount; however, not to an amount higher than the carrying amount that would have been determined (net of depreciation) had no
impairment loss been recognised in prior years.
2.6 Investmentproperty Investment property in the company, which is property held to earn rentals and/or for capital appreciation, is measured initially at
cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. gains or losses
arising from changes in fair value of investment property are included in profit or loss for the period in which they arise.
2.7 Operatingleases leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as
operating leases.
payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way
of penalty is recognised as an expense in the period in which termination takes place.
Consolidated annual financial statements
| ARB Integrated report 201560
for the year ended 30 June 2015
Accountingpoliciescontinued
Assets held for operating leases are depreciated over their estimated useful lives. Income is recognised on a straight line basis
over the lease term unless another systematic basis is more representative of the time pattern in which benefits are diminished.
2.8 Inventory Inventory consists of power and instrumentation cable, overhead line conductor and equipment, general electrical contracting
materials and lamps and light fittings purchased for resale and is valued at the lower of cost or net realisable value. cost is
determined using the weighted average cost basis. Adequate provision is made for obsolete, redundant and slow moving inventory.
2.9 Financialinstruments The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability
or an equity instrument in accordance with the substance of the contractual arrangement. financial instruments are recognised
when the group becomes a party to the contractual provisions of the instrument.
financial instruments are recognised initially at fair value plus transaction costs that are directly attributable to the acquisition or
issue of the financial instrument, except for financial assets at fair value through profit or loss, which are initially measured at fair
value, excluding transaction costs which are recognised in profit or loss.
financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred
and the group has transferred substantially all the risks and rewards of ownership.
Financial assets at fair value through profit and loss
financial assets at fair value through profit and loss include financial assets held for trading and financial assets designated upon
initial recognition at fair value through profit or loss. A financial asset is classified in this category if acquired principally for the
purpose of selling or repurchasing in the short-term. financial assets at fair value through profit and loss comprise derivative
financial instruments, namely forward exchange contracts. Subsequent to initial recognition, financial assets at fair value through
profit and loss are stated at fair value. movements in fair values are recognised in profit and loss, unless they relate to derivatives
designated and effective as hedging instruments, in which event the timing of the recognition in profit or loss depends on the nature
of the hedging relationship. The group designates certain derivatives as hedging instruments in fair value hedges of recognised
assets and liabilities and firm commitments, and in cash flow hedges of highly probable forecast transactions and foreign currency
risks relating to firm commitments.
fluctuations in the fair value of forward exchange contracts used to hedge currency risk of future cash flows, and their fair value
of foreign currency monetary items on the statement of financial position, are recognised directly in other expenses or other
income. This policy has been adopted as the relationship between the forward exchange contracts and the item being hedged does
not meet certain conditions in order to qualify as a hedging relationship.
Trade and other receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the
effective interest rate method, less provision for impairment. Trade receivables are reduced by appropriate allowances for
estimated irrecoverable amounts. Interest on overdue trade receivables is recognised as it is received.
Cash and cash equivalents
cash equivalents comprise short-term, highly liquid investments that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value. An investment with a maturity of three months or less is normally classified
as being short term. Bank overdrafts are shown within borrowings in current liabilities.
Trade and other payables
Trade payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest
rate method.
Bank overdrafts and interest-bearing borrowings
Bank overdrafts and interest-bearing borrowings are recognised initially at fair value, net of transaction costs incurred and
subsequently measured at amortised cost using the effective interest rate method. The effective interest rate method is a
method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the
financial liability.
ARB Integrated report 2015 | 61
Impairment of financial assets
All financial assets measured at amortised cost are assessed for indicators of impairment at each reporting date.
Offsetting of financial instruments
financial assets and liabilities are offset and the net amount reported in the statements of financial position when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle
the liability simultaneously.
2.10 Employeebenefits Share-based payments
cash settled:
Share-linked instruments have been granted to certain employees in the group. The fair value of the amount payable to the
employee is recognised as an expense with a corresponding increase in liabilities. The fair value is initially measured at grant date
and expensed over the period during which the employees are required to provide services in order to become unconditionally
entitled to payment.
The fair value of the instruments granted is measured using the Black Scholes pricing market model, taking into account the terms
and conditions upon which the instruments are granted. The liability is remeasured at each reporting date and at settlement date.
Any changes in the fair value of the liability are recognised as employees’ remuneration in profit or loss.
Short-term employee benefits
The cost of all short-term benefits is recognised during the period in which the employee renders the related service.
The provisions for employee entitlements to salaries, bonus and annual leave represent the amount which the group has a present
obligation to pay as a result of employees’ services provided to the reporting date. The provisions have been calculated at
undiscounted amounts based on current salary rates.
Retirement benefits
The group contributes to defined contribution funds. contributions to defined contribution funds are charged against income as
incurred.
2.11 Incometaxation Current tax
The charge for current tax is based on the results for the year adjusted for items which are tax exempt or are not tax deductible.
Tax is calculated using rates that have been enacted or substantively enacted at the reporting date.
Deferred tax
deferred tax is the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and
liabilities shown on the statement of financial position. deferred tax assets and liabilities are not recognised if they arise in the
following situations:
the initial recognition of goodwill.
The group does not recognise deferred tax liabilities or deferred tax assets on temporary differences associated with investments
in subsidiaries where the parent is able to control the timing of the reversal of the temporary differences and it is not considered
probable that the temporary differences will reverse in the foreseeable future. It is the group’s policy to reinvest undistributed
profits arising in group companies.
deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date.
2.12 Revenuerecognition Revenue comprises sales and services to external customers (excluding value Added Taxation).
The consideration received from customers is recorded as revenue to the extent that the group has performed its contractual
obligations in respect of that consideration and the significant risks and rewards have been transferred to the purchaser.
Rental income from operating leases is recognised in income on a straight-line basis over the lease term.
Consolidated annual financial statements
| ARB Integrated report 201562
for the year ended 30 June 2015
Accountingpoliciescontinued
Interest revenue is recognised in the period in which interest is earned. The amount of revenue is measured using the effective
interest rate method.
2.13 Provisions provisions are recognised when the group has a present legal or constructive obligation as a result of past events, for which it is
probable that an outflow of economic benefits will occur, and when a reliable estimate can be made of the amount of the obligation.
Where the effect of discounting is material, provisions are discounted. The discount rate used is a pre-tax rate.
2.14 Costofsales When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related
revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are
recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories,
arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense
in the period in which the reversal occurs.
The related cost of providing services is recognised as revenue in the current period is included in cost of sales.
2.15 Relatedparties All subsidiaries, associated companies, major shareholders and key management personnel of the group are related parties. A list
of all transactions with major subsidiaries, associated companies, major shareholders and key management personnel is included
in note 27. All transactions entered into with subsidiaries and associated companies have been eliminated in the consolidated
group accounts. directors’ and key management personnel emoluments as well as transactions with other related parties are set
out in notes 25 and 27 respectively. There were no other material contracts with related parties.
2.16 Dividends dividend distributions to the company’s shareholders are recognised as a liability in the company’s financial statements in the
period in which the dividends are approved by the company’s directors.
2.17 Contingenciesandcommitments Transactions are classified as contingent liabilities where the group’s obligations depend on uncertain events and principally
consist of contract specific third party obligations underwritten by banking institutions. Items are classified as commitments where
the group commits itself to future transactions, particularly in the acquisition of property, plant and equipment.
2.18 Cashandcashequivalents cash and cash equivalents comprise cash balances, call deposits and cash floats. cash and cash equivalents are measured at
amortised cost.
2.19 Foreigncurrencytransactions foreign currency transactions are converted to the respective functional currency at the rate of exchange ruling at the date of the
transaction. gains or losses on translation are recognised in profit or loss. At the end of the reporting period foreign currency
monetary items are translated using the closing rate. exchange differences arising on settlement of monetary items or on
translating monetary items at rates different from those at which they were translated on initial recognition during the period, or
in previous annual financial statements, are recognised in profit or loss in the period in which they arise.
2.20 Earningspershare earnings per share is based on attributable profit for the year divided by the weighted average number of ordinary shares in issue
during the year. fully diluted earnings per share is presented when the inclusion of potential ordinary shares has a dilutive effect
on the earnings per share.
2.21 Headlineearningspershare headline earnings per share is based on the same calculation as in 2.20 above except that attributable profit specifically excludes
items as set out in circular 2/2013: “headline earnings” issued by the South African Institute of chartered Accountants. fully
diluted headline earnings per share is presented when the inclusion of potential ordinary shares has a dilutive effect on headline
earnings per share.
ARB Integrated report 2015 | 63
for the year ended 30 June 2015
Notestotheannualfinancialstatements
Group Company
figures in Rand 2015 2014 2015 2014
3. InveSTmenT pRopeRTyopening balances – – 163 230 732 145 162 955
Additions at cost – – 5 081 304 16 222 259
net valuation – – 11 375 467 1 845 518
Revaluation – – 13 419 069 (1 347 708)
deferred lease smoothing – – (2 043 602) 3 193 226
closing balance – – 179 687 503 163 230 732
described as:
Sub 20 of lot 1543, Isipingo, situate at 10 mack Road, prospecton, in extent 23 500 square metres;
Remainder of erf 3461, durban north, Registration division fu, situate at 1461 north coast Road, durban north, in extent 4 171 square
metres;
Sub 12 of lot 2131, pietermaritzburg, situate at 307 Boom Street, pietermaritzburg, in extent 3 528 square metres;
erf 7704, Richards Bay (extension 24), situate at 63 dollar drive, Richards Bay, in extent 4 210 square metres;
erf 19168, east london, situate at 27 Rayon Road, east london, in extent 3 610 square metres;
lot 322, Alrode extension 2, Johannesburg, situate at 8 Bosworth Street, Johannesburg, in extent 13 220 square metres;
erf 6794, montague gardens, cape Town, situate at 14 – 16 Track crescent, cape Town, in extent 6 856 square metres;
erf 21, Riverside Industrial park Township Registration division JT, situate at 15 Waterfall Avenue, Riverside Industrial park, nelspruit,
in extent 4 687 square metres;
erf 115 Waterval east extension 4, Rustenburg, situate at 10 Kgwebo Street, mabe Business park, in extent 2 856 square metres;
erf 849 and 850, Zwartkop extension 4, situate at 11 larch close, centurion, in extent 1 226 and 1 004 square metres respectively;
erf 772, gezina, situate at 600 frederika Street, gezina, in extent 5 104 square metres;
erf 466, Wolmer, situate at 745 president Steyn Street, pretoria north, in extent 2 552 square metres;
portion 1 of erf 1827, pretoria West, situate at 154 Soutter Street, pretoria West, in extent 1 249 square metres;
lot 119 Reuven extension 1, situated at 25/27 Andrea Road, Reuven, Johannesburg in extent 4 649 square metres; and
erf 20993, polokwane extension 91, situated at 13 michelle crescent, polokwane in extent 3 528 square metres.
The fair value of properties is determined every three years and updated annually by an independent professionally qualified valuator,
glen macmillan (m.I.v.S.A.; S.A.c.v. no. 2964). The fair values were determined at 30 June 2014. In updating the valuations at 30 June
2015, the valuator referred to current market conditions, recent sales transactions of similar properties in similar geographical locations
and the present value of future rental income expected to be earned in respect of the properties in their current condition. The cash flows
were estimated based on external evidence of current rentals for similar properties in similar locations. In estimating the fair value of the
properties, the highest and best use of the property is their current use. There has been no change in the valuation technique used during
the year. The fair value hierarchy of investment property has been determined to be a level 2 input. management does no expect there to
be a material sensitivity to the fair values arising from the non-observable and observable inputs. There were no transfers between fair
value levels 1, 2 or 3 during the year.
Consolidated annual financial statements
| ARB Integrated report 201564
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
2015 2014
figures in RandCost/
valuationAccumulated depreciation
Carrying value
cost/valuation
Accumulated depreciation
carrying value
4. pRopeRTy, plAnT And equIpmenTGroup
land 92 181 105 – 92 181 105 86 390 600 – 86 390 600
Buildings 89 550 000 436 064 89 113 936 76 840 132 – 76 840 132
plant and equipment 20 553 117 14 530 740 6 022 377 21 625 238 14 196 084 7 429 154
vehicles 42 026 590 14 650 951 27 375 639 40 338 024 12 377 845 27 960 179
office furniture and fittings 9 063 511 6 642 168 2 421 343 9 118 604 6 596 662 2 521 942
leasehold improvements 2 193 742 1 253 718 940 024 1 962 482 1 048 016 914 466
office equipment 5 608 280 3 718 775 1 889 505 4 580 855 3 110 829 1 470 026
computer equipment 10 104 799 8 376 734 1 728 065 9 532 136 7 532 894 1 999 242
271 281 144 49 609 150 221 671 994 250 388 071 44 862 330 205 525 741
The carrying amounts of property, plant and equipment can be reconciled as follows:
figures in Rand
Carrying value
at beginning of year Additions Revaluation Disposals Depreciation
Carrying value at
end of year
2015
land 86 390 600 – 5 790 505 – – 92 181 105
Buildings 76 840 132 5 081 304 7 628 564 – (436 064) 89 113 936
plant and equipment 7 429 154 1 056 321 – (57 095) (2 406 003) 6 022 377
vehicles 27 960 179 6 099 624 – (1 609 572) (5 074 592) 27 375 639
office furniture and fittings 2 521 942 793 981 – (70 171) (824 409) 2 421 343
leasehold improvements 914 466 231 259 – – (205 701) 940 024
office equipment 1 470 026 1 049 911 – (7 089) (623 343) 1 889 505
computer equipment 1 999 242 1 349 640 – (10 565) (1 610 252) 1 728 065
205 525 741 15 662 040 13 419 069 (1 754 492) (11 180 364) 221 671 994
2014
land* 80 892 212 – 5 498 388 – – 86 390 600
Buildings* 74 032 319 9 805 592 (6 846 096) (151 683) – 76 840 132
plant and equipment 7 651 006 2 393 379 – – (2 615 231) 7 429 154
vehicles 23 823 427 12 391 254 – (3 669 098) (4 585 404) 27 960 179
office furniture and fittings 2 444 973 1 497 777 – (165 786) (1 255 022) 2 521 942
leasehold improvements 938 234 622 096 – – (645 864) 914 466
office equipment 922 950 1 010 826 – – (463 750) 1 470 026
computer equipment 2 916 001 1 046 603 – (32 656) (1 930 706) 1 999 242
193 621 122 28 767 527 (1 347 708) (4 019 223) (11 495 977) 205 525 741
* land and buildings were previously aggregated.
ARB Integrated report 2015 | 65
4. pRopeRTy, plAnT And equIpmenT continuedLand and buildings
described as:
Sub 20 of lot 1543, Isipingo, situate at 10 mack Road, prospecton, in extent 23 500 square metres;
Remainder of erf 3461, durban north, Registration division fu, situate at 1461 north coast Road, durban north, in extent 4 171 square
metres;
Sub 12 of lot 2131, pietermaritzburg, situate at 307 Boom Street, pietermaritzburg, in extent 3 528 square metres;
erf 7704, Richards Bay (extension 24), situate at 63 dollar drive, Richards Bay, in extent 4 210 square metres;
erf 19168, east london, situate at 27 Rayon Road, east london, in extent 3 610 square metres;
lot 322, Alrode extension 2, Johannesburg, situate at 8 Bosworth Street, Johannesburg, in extent 13 220 square metres;
erf 6794, montague gardens, cape Town, situate at 14 -16 Track crescent, cape Town, in extent 6 856 square metres;
erf 21, Riverside Industrial park Township Registration division JT, situate at 15 Waterfall Avenue, Riverside Industrial park, nelspruit,
in extent 4 687 square metres;
erf 115 Waterval east extension 4, Rustenburg, situate at 10 Kgwebo Street, mabe Business park, in extent 2 856 square metres;
erf 849 and 850, Zwartkop extension 4, situate at 11 larch close, centurion, in extent 1 226 and 1 004 square metres respectively;
erf 772, gezina, situate at 600 frederika Street, gezina, in extent 5 104 square metres;
erf 466, Wolmer, situate at 745 president Steyn Street, pretoria north, in extent 2 552 square metres;
portion 1 of erf 1827, pretoria West, situate at 154 Soutter Street, pretoria West, in extent 1 249 square metres;
lot 119 Reuven extension 1, situated at 25/27 Andrea Road, Reuven, Johannesburg in extent 4 649 square metres; and
erf 20993, polokwane extension 91, situated at 13 michelle crescent, polokwane in extent 3 528 square metres.
The fair value of properties is determined every 3 years and updated annually by an independent professionally qualified valuator, glen
macmillan (m.I.v.S.A.; S.A.c.v. no. 2964). The fair values were determined at 30 June 2014. In updating the valuations at 30 June 2015, the
valuator referred to current market conditions, recent sales transactions of similar properties in similar geographical locations and the
present value of future rental income expected to be earned in respect of the properties in their current condition. The cash flows were
estimated based on external evidence of current rentals for similar properties in similar locations. In estimating the fair value of the
properties, the highest and best use of the property is their current use. There has been no change in the valuation technique used during
the year. The fair value hierarchy of land and buildings has been determined to be a level 2 input. management does not expect there to
be a material sensitivity to the fair value arising from the non-observable and observable inputs. There were no transfers between fair
value levels 1, 2 or 3 during the year.
If the cost model had been applied, the carrying value of land would have been R30 593 940 (2014: R30 593 940) and the buildings would
have been R60 904 358 (2014: R55 823 054).
2015 2014
figures in Rand CostAccumulated depreciation
Carrying value cost
Accumulated depreciation
carrying value
Company
plant and equipment 672 313 542 957 129 356 4 207 066 2 533 475 1 673 591
vehicles 9 337 689 5 176 248 4 161 441 12 594 672 6 570 481 6 024 191
10 010 002 5 719 205 4 290 797 16 801 738 9 103 956 7 697 782
Consolidated annual financial statements
| ARB Integrated report 201566
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
4. pRopeRTy, plAnT And equIpmenT continuedThe carrying amounts of property, plant and equipment can be reconciled as follows:
figures in Rand
Carrying value
at beginning of year Additions Disposals Depreciation
Carrying value at
end of year
2015
plant and equipment 1 673 591 17 170 (1 516 186) (45 219) 129 356
vehicles 6 024 191 – (1 052 264) (810 486) 4 161 441
7 697 782 17 170 (2 568 450) (855 705) 4 290 797
2014
plant and equipment 1 888 623 41 963 – (256 995) 1 673 591
vehicles 9 955 841 – (2 675 869) (1 255 781) 6 024 191
11 844 464 41 963 (2 675 869) (1 512 776) 7 697 782
2015 2014
figures in Rand Cost Accumulated amortisation
Carrying value cost
Accumulated amortisation
carrying value
5. InTAngIBle ASSeTSGroup
goodwill 23 909 955 – 23 909 955 23 909 955 – 23 909 955
Trademark – horizon brand 440 000 440 000 – 440 000 440 000 –
Software development costs 1 561 057 312 211 1 248 846 1 561 057 – 1 561 057
Trademark – eurolux brand 58 500 000 – 58 500 000 58 500 000 – 58 500 000
84 411 012 752 211 83 658 801 84 411 012 440 000 83 971 012
The carrying amounts of intangible assets can be reconciled as follows:
figures in Rand
Carrying value at beginning
of year Amortisation
Carrying value at
end of year
2015
goodwill 23 909 955 – 23 909 955
Trademark – horizon brand – – –
Software development costs 1 561 057 (312 211) 1 248 846
Trademark – eurolux brand 58 500 000 – 58 500 000
83 971 012 (312 211) 83 658 801
ARB Integrated report 2015 | 67
figures in Rand
carrying value
at beginning
of year Amortisation
carrying
value at
end of year
5. InTAngIBle ASSeTS continued2014
goodwill 23 909 955 – 23 909 955
Trademark – horizon brand 440 000 (440 000) –
Software development costs 1 561 057 – 1 561 057
Trademark – eurolux brand 58 500 000 – 58 500 000
84 411 012 (440 000) 83 971 012
Intangible assets have been valued as stated in note 2.1 and 2.4.
Software development costs capitalised were brought into use in 2014 and the prior year amortisation included in the current year charge.
Impairment tests were conducted on the carrying value based on forecast cash flows and no impairment was considered necessary.
The horizon trade name was acquired in June 2013 and has been brought into use and was fully amortised.
Impairment tests relating to the eurolux trademark and goodwill were conducted. management has based its assumptions on past
experience which is detailed in note 2.1. The eurolux trademark is believed to have an indefinite useful life as the brand is increasing its
market share and there is no foreseeable limit to the period that this brand will be generating economic benefits for the group.
management has calculated its cash flow and revenue projection over a 5-year period. estimated cash flows longer than 5 years may
result in significant fluctuations due to the higher degree of uncertainty. The growth rates used do not exceed the long-term average
growth rate for the industry or market in which the group operates. other key assumptions used in the projection are as follows:
electrical lighting corporate
growth rates
1 to 5 years 7% 10% 8%
discount rates 20% 20% 20%
management has based its assumptions on past experience and external sources of information, such as industry sector reports and
market expectations.
The carrying amount of the intangible assets allocated to each reportable segment is as follows:
figures in Rand Electrical Lighting Corporate Total
2015
goodwill 5 500 001 18 409 954 – 23 909 955
Software development costs – – 1 248 846 1 248 846
Trademark – 58 500 000 – 58 500 000
5 500 001 76 909 954 1 248 846 83 658 801
2014
goodwill 5 500 001 18 409 954 – 23 909 955
Software development costs – – 1 561 057 1 561 057
Trademark – 58 500 000 – 58 500 000
5 500 001 76 909 954 1 561 057 83 971 012
Consolidated annual financial statements
| ARB Integrated report 201568
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
Group Company
figures in Rand 2015 2014 2015 2014
6. InveSTmenT In SuBSIdIARIeSARB electrical Wholesalers (pty) ltd – at cost
7 400 ordinary shares of R1 each – – 7 400 7 400
ARB IT Solutions (pty) ltd – at cost
100 ordinary shares of R1 each – – 100 100
ARB global (pty) ltd – at cost
100 ordinary shares of R1 each – – 100 100
eurolux (pty) ltd – at cost
1 140 ordinary shares – – 78 000 000 78 000 000
ced – consolidated electrical distributor (pty) ltd
120 ordinary shares of no par value – – 120 120
– – 78 007 720 78 007 720
Set out below is the summarised information in respect of each subsidiary with material non-controlling interests. The subsidiaries are
incorporated in, and their principal place of operation is, South Africa. The summarised information below is presented before inter-
company eliminations and adjustments on consolidation:
ARBElectricalWholesalers
(Pty)Ltd Eurolux(Pty)Ltd
figures in Rand 2015 2014 2015 2014
% of interest and voting rights held by non-controlling interest 26 26 40 40
profit for the year allocated to non-controlling interest 24 848 973 26 110 451 10 818 469 10 272 872
Accumulated non-controlling interests at end of the
reporting period 152 615 621 143 366 648 47 026 527 39 624 058
dividend paid to non-controlling interest 15 600 000 6 760 000 3 416 000 2 640 000
Total revenue 1 695 748 902 1 841 112 290 425 499 049 350 815 274
profit for the year 95 572 973 100 424 845 27 046 173 25 682 177
Total assets 783 102 891 801 138 337 239 195 389 183 788 137
Total liabilities 196 119 733 249 728 152 121 629 058 84 727 979
net cash flow from operating activities 75 961 395 34 953 492 (34 955 833) 3 183 719
net cash utilised by investing activities (9 359 449) (7 454 797) (1 802 451) (2 695 880)
net cash (utilised)/generated by financing activities (51 145 182) 22 455 138 38 742 339 (801 569)
Refer to note 10 in the directors’ report for the issued share capital, percentage held and number of shares held of each subsidiary.
Group Company
figures in Rand 2015 2014 2015 2014
7. InvenToRymerchandise for resale 404 926 796 404 084 131 – –
Allowance for impairment (16 953 912) (12 735 764) – –
387 972 884 391 348 367 – –
Inventory has been valued as stated in note 2.8.
ARB Integrated report 2015 | 69
Group Company
figures in Rand 2015 2014 2015 2014
7. InvenToRy continuedImpairment allowance
Allowance for impairment in respect of inventory
can be reconciled as follows:
opening balance 12 735 764 11 811 403 – –
Impairment recognised in profit and loss 4 218 148 924 361 – –
closing balance 16 953 912 12 735 764 – –
The following factors were considered in determining the amount of the impairment of inventory:
historic sales trends; and
merchandise for resale on hand at reporting date which will not be sold, or will be sold below cost.
Group Company
figures in Rand 2015 2014 2015 2014
8. defeRRed leASe IncomeArising on the straight-lining of income earned
under operating leases:
long-term portion – – 2 043 602 –
current portion 328 674 – – –
net deferred lease income 328 674 – 2 043 602 –
9. TRAde And oTheR ReceIvABleSgross trade receivables 334 402 435 338 886 668 – –
other receivables 17 788 022 3 284 151 – –
prepayments 6 031 349 2 679 409 161 620 10 515
deposits 659 015 581 256 – –
vAT refundable 4 231 176 3 699 366 – –
363 111 997 349 130 850 161 620 10 515
Allowance for impairment (11 766 851) (7 207 180) – –
351 345 146 341 923 670 161 620 10 515
The carrying value of trade and other receivables
approximated their fair value due to the short-term nature
of these instruments.
Impairment allowance
Allowance for impairment in respect of trade receivables
opening balance 7 207 180 8 922 645 – –
provision utilised (2 005 363) (5 003 361) – –
Reversal of provisions (5 201 817) (3 833 273) – –
new provisions raised 11 766 851 7 121 169 – –
closing balance 11 766 851 7 207 180 – –
Consolidated annual financial statements
| ARB Integrated report 201570
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
9. TRAde And oTheR ReceIvABleS continuedThe following table illustrates the relationship between aged gross trade receivables and the impairment allowance:
Group
figures in Rand
Gross trade receivables
2015
Impairment allowance
2015
gross trade receivables
2014
Impairment allowance
2014
not past due 292 420 168 496 740 285 785 719 1 152 821
past due 0 to 30 days 16 400 690 1 192 395 29 790 431 1 514 292
past due 30 to 60 days 8 440 484 2 791 464 10 621 375 1 330 482
past due 60 days + 17 141 093 7 286 252 12 689 143 3 209 585
334 402 435 11 766 851 338 886 668 7 207 180
The following factors were considered in determining the
amount of the impairment of trade receivables:
financial difficulties
Abscondences
disputes
Exposure to credit risk
gross trade receivables represent the maximum
credit exposure 334 402 435 338 886 668
The gross trade receivables at the reporting date by type of customer was spread across the following categories:
government/parastatals/municipalities;
large industry/mining sector;
large contractors;
Small contractors;
Wholesalers;
export customers; and
Retail and hardware chains.
The group’s trade receivable balances with government, retail and hardware chains, parastatals, municipalities, large industry, the
mining sector and large contractors, reduces the group’s exposure to credit risk.
credit risk in respect of small contractors and wholesalers is controlled through the use of credit vetting agencies and the setting and
monitoring of credit limits by senior financial management.
credit risk in respect of ARB electrical Wholesalers (pty) ltd’s and ARB global (pty) ltd’s export customers is reduced through the use
of credit insurance, whereas eurolux (pty) ltd and ced – consolidated electrical distributor (pty) ltd maintain credit insurance in respect
of all customers. Since 1 may 2015, ARB electrical Wholesalers (pty) ltd has also contracted credit insurance in respect of all customers.
The credit risk in respect of other receivables is considered by the directors to be minimal as it relates to transactions with major
corporations within the Republic of South Africa.
credit evaluations are performed using the reports and tools of credit vetting agencies amongst other things, on new customers and
existing customers requiring credit above their previously authorised levels. listings of overdue customer balances are reviewed daily and
any customers exceeding their credit terms must settle their overdue balance before any further credit is extended. overdue trade
receivables are handed over to attorneys for collection as soon as it becomes apparent that recovery may be uncertain.
The group has an overdraft facility in terms of which certain subsidiaries have ceded their book debts in favour of nedbank ltd as security
for this facility. This facility was unutilised at 30 June 2015 (2014: utilised to the value of R79).
ARB Integrated report 2015 | 71
Group Company
figures in Rand 2015 2014 2015 2014
10. cASh And cASh equIvAlenTScash and cash equivalents consist of cash on hand and
balances with banks and investment managers. cash and
cash equivalents included in the statement of cash flows
comprise the following statement of financial position
amounts:
Favourable cash balances
cash on hand 161 620 147 396 1 000 1 000
Bank balances 226 618 739 197 436 163 16 509 730 545 518
226 780 359 197 583 559 16 510 730 546 518
Overdraft
Bank overdraft – (79) – –
– (79) – –
226 780 359 197 583 480 16 510 730 546 518
11. ShARe cApITAlAuthorised
1 000 000 000 ordinary shares of 0,01 cents each 100 000 100 000 100 000 100 000
Issued
235 000 000 ordinary shares of 0,01 cents 23 500 23 500 23 500 23 500
The directors are authorised, until the forthcoming Annual
general meeting, to issue and allot 5% of the unissued
shares for any purpose and upon such terms and conditions
as they deem fit.
12. ReSeRveSRevaluation reserve
The revaluation reserve is the gain which has arisen from
the revaluation of land and buildings. There are no
restrictions on the distribution of this reserve. 70 302 276 60 100 099 71 313 740 62 061 693
Capital reserve
The capital reserve is the gain which arose from the sale of
the electrical wholesale operations to ARB electrical
Wholesalers (pty) ltd in 2004 to a subsidiary in terms of a
Broad Based Black economic empowerment transaction. – – 26 234 082 26 234 082
13. vendoR loAn AccounTfredcor Trust – 18 466 – –
This loan represented amounts payable to the previous shareholder of elektro vroomen (pty) ltd and was repaid during the year
under review.
Consolidated annual financial statements
| ARB Integrated report 201572
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
14. employee BenefITSDefined contribution plan
It is the policy of the group to provide retirement benefits to all its employees. A number of defined contribution provident and pension
funds, all of which are governed by the pensions fund Act of 1956, exist for this purpose. These include the Alexander forbes Retirement
fund, Investment Solutions, liberty corporate provident fund and momentum funds at Work. All the schemes are funded by group
contributions, which are charged to the statement of comprehensive income as they are incurred. The total group contribution to such
schemes in 2015 was R12 067 626 (2014: R10 428 776) and for the company was R309 857 (2014: R408 862).
Share appreciation rights
The directors elected to introduce a Share Appreciation Rights (“SAR”) plan in the previous years. These were awarded to directors of the
company and its subsidiaries, together with key management personnel. These plans are 100% cash-settled and no shares will be
subscribed for or allotted in terms hereof.
The details of the SARs granted for each plan are detailed below:
Plan3No.ofSARs
Plan2No.ofSARs
Plan1No.ofSARs
figures in Rand group company group company group company
outstanding at beginning of year 8 644 000 2 032 000 868 800 120 000 1 856 000 400 000
current year transactions
exercised (1 933 000) (280 000) (249 600) – (708 000) –
forfeited/declined (1 632 000) (912 000) (320 000) (120 000) (440 000) (400 000)
outstanding at end of year 5 079 000 840 000 299 200 – 708 000 –
The fair value was calculated using the Black Scholes pricing market model. The assumptions used in determining fair value of each SARs
granted are summarised below:
estimated fair value
Share price R6,00 R6,00 R6,00
grant price R4,72 R3,84 R3,11
expected SAR life 5 years 5 years 5 years
volatility 30% 30% 30%
Risk-free rate 7,8% 7,8% 7,8%
dividend yield 3,35% 3,35% 3,35%
year of issue 2013 2012 2011
Remaining contractual life 3 years 2 years 1 year
The risk-free rate of 7,8% has been assumed, based on the prevailing return on a 5-year government retail bond as at 1 march 2014.
The volatility of 30% was determined based on the historical volatility of the company’s share price over the previous year. The dividend
yield of 3,35% is based on the dividends paid over the previous year.
The share price of R6,00 is determined vWAp of ARB holding shares for June 2015.
no further SARs have been awarded during the year under review.
ARB Integrated report 2015 | 73
Group Company
figures in Rand 2015 2014 2015 2014
14. employee BenefITS continuedShare appreciation rights
Accrual at beginning of year 8 571 936 2 004 896 1 688 640 464 961
cost of SARs exercised during the year (6 427 798) (4 622 269) (406 000) (1 187 470)
expense/(gain) during the year (1 114 057) 11 189 309 (1 282 640) 2 411 149
Accrual at end of year 1 030 081 8 571 936 – 1 688 640
The expense/(gain) above arises from SARs forfeited with
the resignation of the participants and the effect of the
change in assumptions as disclosed above.
15. defeRRed TAXATIonBalance at beginning of year (20 938 990) (26 033 993) (15 558 818) (17 268 807)
movements during the year attributable to:
Investment properties – – (2 488 722) (638 659)
doubtful debt allowance 957 532 (360 249) – –
leave pay and bonus accrual (578 274) 1 330 416 (29 594) 48 482
Incentive accrual (932 778) 1 509 326 (638 400) 638 400
Inventory obsolescence allowance 615 383 34 579 – –
property, plant and equipment – revaluation land and buildings (3 216 892) 890 541 – –
property, plant and equipment – other (391 831) (150 201) 542 621 425 033
Intangible assets 87 419 (2 873) – –
prepayments (859 615) 79 521 – –
Assessed loss (2 825 051) (271 126) – –
provision for credit notes 258 748 117 100 – –
lease smoothing effect 71 302 (110 975) (572 208) 894 103
Interest accrual (612 810) 190 173 – –
Share appreciation rights (2 111 719) 1 838 771 (472 819) 342 630
Balance at end of year (30 477 576) (20 938 990) (19 217 940) (15 558 818)
Consolidated annual financial statements
| ARB Integrated report 201574
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
Group Company
figures in Rand 2015 2014 2015 2014
15. defeRRed TAXATIon continuedThe balance comprises:
Investment properties – – (17 797 126) (15 308 404)
Revaluation of investment properties – – (16 461 985) (14 338 564)
Building allowance – – (1 335 141) (969 840)
doubtful debt allowance 2 471 039 1 513 507 – –
leave pay and bonus accrual 2 766 834 3 345 108 80 027 109 621
Incentive accrual 576 548 1 509 326 – 638 400
Inventory obsolescence allowance 1 962 287 1 346 904 – –
property, plant and equipment – revaluation land and buildings (19 517 050) (16 300 158) – –
property, plant and equipment – other (3 733 261) (3 341 430) (928 633) (1 471 254)
Intangible assets (16 729 677) (16 817 096) – –
prepayments (1 476 958) (617 343) – –
Assessed loss 1 692 686 4 517 737 – –
provision for credit notes 809 692 550 944 – –
lease smoothing effect 185 486 114 184 (572 208) –
Interest accrual 226 375 839 185 – –
Share appreciation rights 288 423 2 400 142 – 472 819
(30 477 576) (20 938 990) (19 217 940) (15 558 818)
deferred tax liability (38 626 437) (34 127 052) (19 217 940) (15 558 818)
deferred tax asset 8 148 861 13 188 062 – –
(30 477 576) (20 938 990) (19 217 940) (15 558 818)
ARB Integrated report 2015 | 75
Group Company
figures in Rand 2015 2014 2015 2014
16. TRAde And oTheR pAyABleSTrade payables 218 821 321 240 670 204 – –
Accruals 9 180 026 7 330 144 1 930 932 361 473
payroll accruals 5 256 911 12 564 213 – 3 547 975
Share appreciation rights 1 030 081 8 571 936 – 1 688 640
leave pay and bonus accrual 7 112 178 9 666 813 285 811 391 505
vAT payable 9 907 560 4 879 344 525 579 786 457
other payables 877 369 435 270 – 231 771
252 185 446 284 117 924 2 742 322 7 007 821
The carrying value of trade and other payables approximated
their fair value due to the short-term nature of these
instruments.
17. loAnS ReceIvABle/(pAyABle)ced – consolidated electrical distributor (pty) ltd – – 12 737 986 7 500 961
ARB global (pty) ltd – – (2 803 840) 674 058
eurolux (pty) ltd – – 76 692 150 38 081 595
ARB IT Solutions (pty) ltd – – (221 292) (200 028)
ARB electrical Wholesalers (pty) ltd – – (26 969 580) 26 445 520
– – 59 435 424 72 502 106
current assets – – 89 430 136 72 702 134
current liabilities – – (29 994 712) (200 028)
– – 59 435 424 72 502 106
The inter-company loans are unsecured, bear interest at
rates linked to prime and have no fixed terms of repayment.
They arise primarily for the purposes of trading as the
company performs a treasury function for the group.
These loans are neither past due nor impaired.
18. defeRRed leASe pAymenTSArising on the straight-lining of payments made under
operating leases:
long-term portion 980 758 – – –
current portion 10 364 440 201 – –
net deferred lease payments 991 122 440 201 – –
Consolidated annual financial statements
| ARB Integrated report 201576
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
Group Company
figures in Rand 2015 2014 2015 2014
19. pRofIT BefoRe InTeReST And TAXATIonprofit before interest and taxation is arrived at after taking
into account the following items:
Income
lease rentals 640 080 622 090 28 563 462 27 986 940
fair value adjustment to investment properties – – 11 375 467 1 845 518
profit on disposal of property, plant and equipment – 57 874 – –
exchange rate profits on foreign exchange 247 193 5 634 835 – –
expenditure
exchange rate losses on foreign exchange 4 719 800 3 814 300 – –
depreciation 11 180 364 11 495 977 855 705 1 512 776
Amortisation of intangible assets 312 211 440 000 – –
Auditors’ remuneration
Audit fees 1 194 550 1 189 705 443 150 412 050
current 1 118 900 1 164 630 367 500 412 050
other services 75 650 25 075 75 650 –
operating lease charges – premises 17 978 000 14 347 096 – 942 924
Allowance for impairment – inventory 4 218 148 924 361 – –
Allowance for impairment – trade receivables 4 559 671 (1 715 465) – –
Share appreciation rights (1 114 057) 11 189 309 (1 282 640) 2 411 159
loss on sale of property, plant and equipment 29 150 – – –
direct operating expenses of investment property
That generated rental income – – 327 740 951 883
That did not generate rental income – – – 31 879
20. STAff coSTSShort-term employee benefits 141 358 934 133 480 815 719 797 993 694
contributions to retirement funds 11 797 323 10 050 665 39 554 30 751
other employment benefits 12 611 239 9 855 805 187 537 348 648
other staff costs 7 788 552 10 406 289 31 071 3 503 679
173 556 048 163 793 574 977 959 4 876 772
Short-term employee benefits comprise salaries, commissions, share appreciation rights and bonuses paid.
other employment benefits comprise travel allowances, fringe benefits on the use of company vehicles and contributions to medical
aid funds.
other staff costs comprise accruals raised but not paid in respect of the future liability for share appreciation rights and other bonuses,
as well as staff training and related expenditure.
Staff costs includes key management personnel (note 27) and excludes directors’ emoluments (note 25).
ARB Integrated report 2015 | 77
Group
2015Number
2014
number
20. STAff coSTS continuedAverage number of persons employed by the group during the year: 924 886
Group Company
figures in Rand 2015 2014 2015 2014
21. InTeReST ReceIvedfinancial institutions 9 147 283 6 861 501 1 248 653 2 270 362
Trade receivables 6 016 182 4 568 804 – –
South African Revenue Service 11 504 11 905 – –
eurolux (pty) ltd – – 6 042 375 3 672 762
ced – consolidated electrical distributor (pty) ltd – – 1 183 143 758 354
ARB IT Solutions (pty) ltd – – 9 633 –
15 174 969 11 442 210 8 483 804 6 701 478
22. InTeReST pAIdfinancial institutions 54 434 188 940 – –
South African Revenue Services 40 657 376 – –
ARB IT Solutions (pty) ltd – – – 204 752
ARB electrical Wholesalers (pty) ltd – – 2 392 874 1 760 449
95 091 189 316 2 392 874 1 965 201
23. TAXATIonSA normal tax
current taxation 52 159 342 63 962 738 8 335 303 10 126 590
overprovision in prior year – (44 356) – –
deferred taxation
current year temporary differences 6 321 694 (4 219 485) 3 659 122 (1 709 989)
underprovision in prior year – 9 353 – –
Tax for the year 58 481 036 59 708 250 11 994 425 8 416 601
Consolidated annual financial statements
| ARB Integrated report 201578
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
Reconciliation of rate of taxation % % % %
23. TAXATIon continuedSA normal taxation rate 28,00 28,00 28,00 28,00
Adjusted for:
Special allowances (0,54) (0,21) – –
exempt income – – (15,22) (14,12)
non-deductible expenses 0,18 0,09 – –
prior year overprovision – (0,02) – –
Revaluation of investment properties at cgT rate – – (1,04) (0,28)
net reduction (0,36) (0,14) (16,26) (14,40)
effective rate of taxation 27,64 27,86 11,74 13,60
In one of the subsidiaries, the SA normal tax charge in the current year has been reduced by R2 825 051 (2014: R968 307) as a result of a
portion of a taxation loss utilised. The value of the unutilised taxation loss amounts to R6 045 308 (2014: R16 134 775).
Group Company
figures in Rand 2015 2014 2015 2014
24. oTheR compRehenSIve IncomeRevaluation of land 5 790 505 5 498 388 – –
Revaluation of buildings 7 628 564 (6 846 096) – –
gain/(loss) on property revaluation 13 419 069 (1 347 708) – –
Taxation on revaluation of land (1 080 894) (1 025 339) – –
Taxation on revaluation of buildings (2 135 998) 1 915 880 – –
Total deferred taxation (3 216 892) 890 541 – –
Total other comprehensive income/(loss) 10 202 177 (457 167) – –
The tax charge in respect of land is calculated at the
effective capital gains Tax (“cgT”) rate.
25. dIRecToRS’ emolumenTSEmoluments received
Salary 2 829 883 3 781 113 2 829 883 3 781 113
directors’ fees 1 580 533 1 502 000 1 580 533 1 502 000
contributions to retirement funds 270 303 378 111 270 303 378 111
other employment benefits 242 792 340 776 242 792 340 776
performance bonus 2 359 000 – 2 359 000 –
Share appreciation rights 406 000 1 700 480 406 000 1 700 480
Total emoluments received 7 688 511 7 702 480 7 688 511 7 702 480
ARB Integrated report 2015 | 79
25. dIRecToRS’ emolumenTS continuedReceived as follows:
GroupandCompany
figures in Rand Salary
Perfor-mance bonus
Directors’ fees
Contri-butions to
retirement funds
Share appre-ciation rights
Other employ-
ment benefits Total
2015
Executive Directors
B nichles* 973 353 1 363 000 – 90 226 – 68 848 2 495 427
WR neasham 1 856 530 996 000 – 180 077 406 000 173 944 3 612 551
Non-Executive Directors
AR Burke – – 424 000 – – – 424 000
ST downes – – 363 600 – – – 363 600
JR modise – – 118 733 – – – 118 733
g pretorius – – 326 500 – – – 326 500
RB patmore – – 347 700 – – – 347 700
2 829 883 2 359 000 1 580 533 270 303 406 000 242 792 7 688 511
2014
Executive Directors
B nichles 2 179 098 – – 217 910 1 173 080 202 992 3 773 080
WR neasham 1 602 015 – – 160 201 527 400 137 784 2 427 400
Non-Executive Directors
AR Burke – – 390 000 – – – 390 000
ST downes – – 333 000 – – – 333 000
JR modise – – 168 000 – – – 168 000
g pretorius – – 298 000 – – – 298 000
RB patmore – – 313 000 – – – 313 000
3 781 113 – 1 502 000 378 111 1 700 480 340 776 7 702 480
* Resigned 31 october 2014.
Consolidated annual financial statements
| ARB Integrated report 201580
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
Group
figures in Rand 2015 2014
26. eARnIngS And dIvIdendS peR ShARe26.1 Basicanddilutedearningspershare
Basic earnings as disclosed 117 458 444 118 190 892
Weighted number of shares 235 000 000 235 000 000
diluted number of shares 235 000 000 235 000 000
Basic earnings per share (cents) 49,98 50,29
diluted earnings per share (cents) 49,98 50,29
26.2 HeadlineanddilutedheadlineearningspershareBasic earnings as disclosed 117 458 444 118 190 892
loss/(surplus) on disposal of property, plant and equipment (net of taxation) 20 988 (41 669)
minority interest therein (8 395) 10 834
headline earnings 117 471 037 118 160 057
headline earnings per share (cents) 49,99 50,28
diluted headline earnings per share (cents) 49,99 50,28
26.3 ReconciliationofweightedanddilutedweightedaveragenumberofsharesIssued shares at beginning of the year 235 000 000 235 000 000
Weighted average number of shares 235 000 000 235 000 000
dilutive effect of share options – –
diluted weighted average number of shares 235 000 000 235 000 000
26.4 Dividendspersharedividends declared during the year 70 735 000 61 570 000
number of shares 235 000 000 235 000 000
dividends per share (cents) 30,10 26,20
ordinary dividend per share 20,10 16,20
Special dividend per share 10,00 10,00
The final dividend for the year ended 30 June 2015 which has been only declared after year end has not been included as a liability
in the financial statements.
27. RelATed pARTy TRAnSAcTIonSThe subsidiaries of the group are identified in note 10 to the directors’ report. All of these entities are related parties to the company.
details of material transactions with related parties are disclosed below and also as follows:
Interest received note 21
Interest paid note 22
directors’ emoluments note 25
Investments in subsidiaries note 6
loans receivable from subsidiaries note 17
loans payable to subsidiaries note 17
directors’ shareholding note 12 to the directors’ report
ARB Integrated report 2015 | 81
27. RelATed pARTy TRAnSAcTIonS continued
other transactions not disclosed elsewhere Relationship to company nature of business 2015 2014
Rentals paid to ARB Holdings Ltd by
Industrial cable Suppliers (pty) ltd Subsidiary electrical wholesaler – 746 325
ARB electrical Wholesalers (pty) ltd Subsidiary electrical wholesaler 22 270 980 29 288 719
ARB IT Solutions (pty) ltd Subsidiary IT service provider 39 000 296 499
elektro vroomen (pty) ltd Subsidiary electrical wholesaler – 67 947
ced – consolidated electrical distributor
(pty) ltd
Subsidiary export/import electrical
wholesaler
– 61 037
Rentals paid to ARB Electrical Wholesalers
(Pty) Ltd by
elektro vroomen (pty) ltd Subsidiary electrical wholesaler – 32 000
Rentals paid by Eurolux (Pty) Ltd to
Riverport Investments (pty) ltd common shareholders property owning 2 543 814 5 804 473
Rapiprop 110 (pty) ltd common shareholders property owning 2 031 165 4 738 197
green Willows properties 255 (pty) ltd common shareholders property owning 7 069 915 –
Purchases made by ARB IT Solutions
(Pty) Ltd from
protime computer Systems cc common director/member IT service provider 96 000 89 000
Purchases made by ARB Electrical
Wholesalers (Pty) Ltd from
ARB IT Solutions (pty) ltd Subsidiary IT service provider 7 297 008 5 071 369
ARB global (pty) ltd Subsidiary export/import electrical
wholesaler
37 660 076 30 330 946
Industrial cable Suppliers (pty) ltd Subsidiary electrical wholesaler (49 071) 17 878 755
elektro vroomen (pty) ltd Subsidiary electrical wholesaler 10 514 845 5 393 566
eurolux (pty) ltd Subsidiary export/import lighting
wholesaler
15 846 461 10 582 108
ced – consolidated electrical distributor
(pty) ltd
Subsidiary export/import electrical
wholesaler
4 964 238 4 650 108
Sales made by ARB Electrical Wholesalers
(Pty) Ltd to
ARB IT Solutions (pty) ltd Subsidiary IT service provider 3 618 1 086
Industrial cable Suppliers (pty) ltd Subsidiary electrical wholesaler – 39 651 459
elektro vroomen (pty) ltd Subsidiary electrical wholesaler 53 643 190 24 173 666
The Burke Investment Trust Shareholder Investment trust 202 234 97 324
eurolux (pty) ltd Subsidiary export/import lighting
wholesaler
236 507 24 290
ced – consolidated electrical distributor
(pty) ltd
Subsidiary export/import electrical
wholesaler
13 613 104 073
ARB global (pty) ltd Subsidiary export/import electrical
wholesaler
25 204 864 10 478 617
Management fee paid to ARB Holdings Ltd by
ARB electrical Wholesalers (pty) ltd Subsidiary electrical wholesaler 7 096 331 12 273 705
ARB IT Solutions (pty) ltd Subsidiary IT service provider 210 000 180 000
ARB global (pty) ltd Subsidiary export/import electrical
wholesaler
120 000 6 000
Consolidated annual financial statements
| ARB Integrated report 201582
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
27. RelATed pARTy TRAnSAcTIonS continued
other transactions not disclosed elsewhere Relationship to company nature of business 2015 2014
eurolux (pty) ltd Subsidiary export/import lighting
wholesaler
578 442 540 600
ced – consolidated electrical distributor
(pty) ltd
Subsidiary export/import electrical
wholesaler
360 000 180 000
Management fee paid to ARB Electrical
Wholesalers (Pty) Ltd by
Industrial cable Suppliers (pty) ltd Subsidiary electrical wholesaler – 360 000
Sales made by ARB Global (Pty) Ltd to
ced – consolidated electrical distributor
(pty) ltd
Subsidiary export/import electrical
wholesaler
– 4 862 349
elektro vroomen (pty) ltd Subsidiary electrical wholesaler 506 081 12 451
Sales made by ARB IT Solutions (Pty) Ltd to
ARB electrical Wholesalers (pty) ltd Subsidiary electrical wholesaler 7 297 008 5 071 369
ARB global (pty) ltd Subsidiary export/import electrical
wholesaler
3 618 1 295
ced – consolidated electrical distributor
(pty) ltd
Subsidiary export/import electrical
wholesaler
98 202 213 987
Industrial cable Suppliers (pty) ltd Subsidiary electrical wholesaler – 252 380
elektro vroomen (pty) ltd Subsidiary electrical wholesaler 515 439 603 448
Sales made by CED – Consolidated Electrical
Distributor (Pty) Ltd to
Industrial cable Suppliers (pty) ltd Subsidiary electrical wholesaler – 4 000
elektro vroomen (pty) ltd Subsidiary electrical wholesaler 116 447 54 620
eurolux (pty) ltd Subsidiary export/import lighting
wholesaler
215 399 20 402
Sales made by Elektro Vroomen (Pty) Ltd to
ARB electrical Wholesalers (pty) ltd Subsidiary electrical wholesaler 10 514 845 5 393 566
Industrial cable Suppliers (pty) ltd Subsidiary electrical wholesaler – 47 204
Sales made by Industrial Cable Suppliers
(Pty) Ltd to
elektro vroomen (pty) ltd Subsidiary electrical wholesaler – 246 154
Purchases made by Eurolux (Pty) Ltd from
Industrial cable Suppliers (pty) ltd Subsidiary electrical wholesaler – 4 000
elektro vroomen (pty) ltd Subsidiary electrical wholesaler – 4 307
ced – consolidated electrical distributor
(pty) ltd
Subsidiary export/import electrical
wholesaler
215 399 20 402
Sales made by Eurolux (Pty) Ltd to
ARB electrical Wholesalers (pty) ltd Subsidiary electrical wholesaler 15 846 461 10 582 108
Industrial cable Suppliers (pty) ltd Subsidiary electrical wholesaler – 135 805
elektro vroomen (pty) ltd Subsidiary electrical wholesaler 978 061 601 242
ARB Integrated report 2015 | 83
27. RelATed pARTy TRAnSAcTIonS continuedKey management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of
the group, directly and indirectly, and include directors of the subsidiaries, divisional directors, regional managers, branch managers and
department managers.
Group Company
figures in Rand 2015 2014 2015 2014
Short-term employment benefits 34 535 532 26 273 706 – –
contributions to retirement funds 2 547 791 2 299 277 – –
other employment benefits 3 969 093 2 846 336 – –
41 052 416 31 419 319 – –
Short-term employment benefits comprise salaries, commission, share appreciation rights and bonuses paid.
other employment benefits comprise travel allowances, fringe benefits on the use of the company’s vehicles and contributions to medical
aid funds.
Information regarding the earnings of directors, executive and non-executive, have been disclosed separately in note 25.
figures in RandNon-financial
instrumentsLoans and
receivables
Liabilities at amortised
costCarrying
value
28. fInAncIAl RISK mAnAgemenTclassification of financial instruments
Group
Assets
2015
Trade and other receivables 4 231 176 347 113 970 – 351 345 146
cash and cash equivalents – 226 780 359 – 226 780 359
deferred lease income – 328 674 – 328 674
2014
Trade and other receivables 3 699 366 338 224 304 – 341 923 670
cash and cash equivalents – 197 583 559 – 197 583 559
Liabilities
2015
Trade and other payables 18 049 819 – 234 135 627 252 185 446
deferred lease payments – – 991 122 991 122
2014
Trade and other payables 23 118 093 – 260 999 831 284 117 924
vendor loan account – – 18 466 18 466
deferred lease payments – – 440 201 440 201
Bank overdraft – – 79 79
Consolidated annual financial statements
| ARB Integrated report 201584
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
figures in RandNon-financial
instrumentsLoans and
receivables
Liabilities at amortised
costCarrying
value
28. fInAncIAl RISK mAnAgemenT continuedCompany
Assets
2015
deferred lease income – 2 043 602 – 2 043 602
loan receivable – 89 430 136 – 89 430 136
Trade and other receivables – 161 620 – 161 620
cash and cash equivalents – 16 510 730 – 16 510 730
2014
loan receivable – 72 702 134 – 72 702 134
Trade and other receivables – 10 515 – 10 515
cash and cash equivalents – 546 518 – 546 518
Liabilities
2015
Trade and other payables 811 390 – 1 930 932 2 742 322
loans payable – – 29 994 712 29 994 712
2014
Trade and other payables 2 866 602 – 4 141 219 7 007 821
loans payable – – 200 028 200 028
The group’s operations expose it to a number of financial risks, namely credit, liquidity, interest rate, foreign exchange and commodity
price risk. The group has financial risk management processes in place to protect against and minimise the potential adverse effects of
these financial risks. This note presents information regarding the exposure to each of these risks and processes for managing them.
Credit risk
credit risk is the risk of financial loss if a customer or counter-party to a financial instrument fails to meet its contractual obligations and
arises principally from the group’s gross trade receivables and cash and cash equivalents held at banking institutions.
The group trades only with recognised, creditworthy third parties and it is the group’s policy that all customers who wish to trade on credit
terms are subject to credit verification procedures. In addition, trade receivable balances are monitored on an ongoing basis with the
result that the group’s exposure to bad debts is not significant. The group also believes that it has no significant exposure to credit risk
due to the large number of customers comprising the group’s customer base and their dispersion across different industries and
geographical areas. credit risk in respect of ARB electrical Wholesalers’ (since 1 may 2015), eurolux (pty) ltd and ced – consolidated
electrical distributor (pty) ltd is reduced as they maintain credit insurance in respect of all their customers. The maximum exposure is
the carrying amount as disclosed in note 9.
With respect to credit risk arising from the other financial assets of the group, the group’s exposure to credit risk arises from default of
the counter-party, with a maximum exposure equal to the carrying amount of these instruments.
With respect to credit risk arising from loans to related parties, the company’s exposure to credit risk is mitigated by the fact that all related
parties are solvent and liquid and have the ability to raise capital from outside the group to repay the loans from the holding company.
To limit this exposure, the group’s cash is placed only with reputable financial institutions of high credit standing and limits its exposure
to only 3 counter-parties.
ARB Integrated report 2015 | 85
28. fInAncIAl RISK mAnAgemenT continuedLiquidity risk
liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due.
The group ensures, as far as possible, that it has sufficient liquidity available to meet its liabilities as and when they fall due. daily and
monthly cash flow requirements are monitored to ensure sufficient cash is available on demand or that access to facilities is available to
meet expected operational expenses. Any surplus cash is appropriately invested. The group maintains a balance between continuity of
funding and flexibility through the use of bank facilities and inter-company funding.
In addition, the subsidiaries have primary and secondary banking facilities of R118 000 000 (2014:R107 000 000) and R110 000 000 (2014:
R70 000 000) respectively available to finance any working capital requirements.
In terms of the company’s memorandum of Incorporation, there is no limit on the group’s authority to raise interest-bearing debt.
Interest rate risk
Interest rate risk is the risk that changes in the interest rate will affect the group’s income or value of its financial instruments, namely
its cash and cash equivalents and interest-bearing borrowings.
The group’s exposure to the risk of changes in market interest rates relate primarily to the borrowing obligations and loans receivable
within the group, with a variable interest rate. As part of the process of managing the group’s interest rate risk, interest rate characteristics
of new borrowings and the refinancing of existing borrowings are positioned according to expected movement in the interest rate. full
details of interest rates relating to borrowings and loans receivable are detailed in note 17.
Surplus cash and cash equivalents exposed to interest rate risk are placed with institutions and facilities which yield the highest rate of
return, but which are still within acceptable risk parameters.
The group’s income and operating cash flows are substantially independent of changes in the interest rates.
Sensitivity analysis
Group Company
figures in Rand 2015 2014 2015 2014
Net loans receivable
Increase of 100 basis points would result in an improvement
of profit before tax of – – 594 354 725 021
decrease of 200 basis points would result in a reduction
of profit before tax of – – (1 188 708) (1 450 042)
Net cash and cash equivalents
Increase of 100 basis points would result in an improvement
of profit before tax of 2 267 803 1 975 836 165 107 5 465
decrease of 200 basis points would result in a reduction
of profit before tax of (4 535 606) (3 951 672) (330 215) (10 930)
Foreign exchange risk
ARB global (pty) ltd and ARB electrical Wholesalers (pty) ltd hedge their exposure to foreign currency risk against stronger currencies
by entering into forward exchange contracts where there is a pre-determined selling price. Such exposure arises from purchases in
currencies other than in South African Rands. It is the group’s policy to make use of forward exchange contracts to eliminate the currency
exposure on any individual transaction for which the payment is anticipated to be more than one month after the group has entered into
a firm commitment for a purchase. The forward exchange contracts must be in the same currency as the hedged item.
Consolidated annual financial statements
| ARB Integrated report 201586
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
28. fInAncIAl RISK mAnAgemenT continuedforward exchange contracts which relate to future commitments:
Amount in foreign currency purchased forward exchange rate maturity date
uSd 34 211,19 1 uSd = R12,1418 3 July – 17 July 2015
uSd 61 080,12 1 uSd = R12,4173 2 September – 15 September 2015
euR 135 324,00 1 euR = R13,5608 17 August – 28 August 2015
The above forward exchange contracts resulted in a forward exchange asset of R15 546 which was not separately disclosed as it is
considered immaterial. The group expects its foreign exchange contracts to hedge foreign exchange exposure.
There have been no forward exchange contracts in respect of the following orders in foreign currency:
expected payoff date
uSd 47 503,04 6 July 2015
uSd 59 090,50 14 July 2015
uSd 131 311,00 14 July 2015
uSd 28 443,99 17 July 2015
uSd 65 427,02 27 July 2015
uSd 33 818,00 27 July 2015
uSd 94 285,50 28 July 2015
uSd 4 468,16 28 July 2015
uSd 17 825,40 28 July 2015
uSd 322 243,62 31 July 2015
uSd 772,82 31 July 2015
uSd 107 856,50 4 August 2015
The group reviews its foreign exchange exposure, including commitments, on an ongoing basis.
Group Company
figures in Rand 2015 2014 2015 2014
Sensitivity analysis
Change in USD
If the rand weakened by 10%, it would result in a decrease
of profit before tax of (512 172) (142 348) – –
If the rand strengthened by 10%, it would result in an
increase of profit before tax of 512 172 142 348 – –
Change in Euro
If the rand weakened by 10% if would result in a decrease
of the profit before tax of (184 564) (509 418) – –
If the rand strengthened by 10% it would result in an
increase of profit before tax of 184 564 509 418 – –
Commodity price risk
exposure to commodity price risk is reduced through the rationalisation of inventory levels of copper, aluminium and steel-related
products. Stockholding levels of affected products are maintained at an average of 2 to 3 months.
ARB Integrated report 2015 | 87
28. fInAncIAl RISK mAnAgemenT continuedFinancial liabilities
Maturity analysis
The table below summarises the maturity profile of the financial liabilities based on contractual undiscounted payments
Group Company
figures in Rand 2015 2014 2015 2014
Payable in 1 to 12 months
Trade and other payables 234 135 627 260 999 831 1 930 932 4 141 219
loan payable – – 29 994 712 200 028
vendor – loan account – 18 466 – –
deferred lease payments – 440 201 – –
Bank overdraft – 79 – –
234 135 627 261 458 577 31 925 644 4 341 247
Capital management
The group considers equity and long-term interest bearing borrowings as capital.
The group’s objectives when managing capital are to safeguard the entity’s ability to continue as a going concern, so that it can continue
to provide returns for shareholders and benefits for other stakeholders, and to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The group sets the amount of capital in proportion to risk. The group changes the capital structure and makes adjustments to it in the
light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares,
repurchase shares or sell assets to reduce debt.
There were no changes in the group’s approach to capital management during the year. The group is not subject to any externally imposed
capital requirements.
The group monitors capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net debt divided by capital. net
debt is calculated as total debt (as shown in the statement of financial position) less cash and cash equivalents.
capital comprises all components of equity.
The debt-to-adjusted capital ratio at 30 June was as follows:
Group Company
figures in Rand 2015 2014 2015 2014
Total debt 294 295 244 321 428 636 52 175 632 23 653 257
cash and cash equivalents (226 780 359) (197 583 480) (16 510 730) (546 518)
net debt 67 514 885 123 845 156 35 664 902 23 106 739
Total equity 985 811 241 912 234 178 317 956 476 298 542 144
debt to adjusted capital ratio 0,07:1 0,14:1 0,11:1 0,08:1
The decrease in the group’s debt-to-capital ratio during 2015 resulted from the decrease in total debt and the increase in cash and cash
equivalents and equity.
Consolidated annual financial statements
| ARB Integrated report 201588
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
28. fInAncIAl RISK mAnAgemenT continuedFair value hierarchy of financial instruments
financial assets and liabilities measured at fair value in the balance sheet are categorised in its entirety into the following three levels
of the fair value hierarchy based on the basis of the lowest level input that is significant to the fair value measurement in its entirety:
level 1: fair value measured using quoted prices (unadjusted) in active markets for identical financial assets or liabilities;
level 2: fair value measured using inputs other than quoted prices included within level 1 that are observable for the financial asset
or liability, either directly or indirectly; and
level 3: fair value measured using inputs for the financial asset or liability that are not based on observable market data.
financial assets and liabilities that are not measured at fair value on a recurring basis:
figures in Rand Level 1 Level 2 Level 3 Total
Group
2015
Financial assets
loans and receivables
Trade and other receivables – – 347 113 970 347 113 970
cash and cash equivalents – 226 780 359 – 226 780 359
deferred lease income – – 328 674 328 674
Financial liabilities
liabilities at amortised cost
Trade and other payables – – 234 135 627 234 135 627
deferred lease payments – – 991 122 991 122
2014
Financial assets
loans and receivables
Trade and other receivables – – 338 224 304 338 224 304
cash and cash equivalents – 197 583 559 – 197 583 559
Financial liabilities
liabilities at amortised cost
Trade and other payables – – 260 999 831 260 999 831
Bank overdraft – 79 – 79
vendor loan account – – 18 466 18 466
deferred lease payments – – 440 201 440 201
ARB Integrated report 2015 | 89
figures in Rand Level 1 Level 2 Level 3 Total
28. fInAncIAl RISK mAnAgemenT continuedCompany
2015
Financial assets
loans and receivables
deferred lease payments – – 2 043 602 2 043 602
loan receivable – – 89 430 136 89 430 136
Trade and other receivables – – 161 620 161 620
cash and cash equivalents – 16 510 730 – 16 510 730
Financial liabilities
liabilities at amortised cost
Trade and other payables – – 1 930 932 1 930 932
loans payable – – 29 994 712 29 994 712
2014
Financial assets
loans and receivables
loan receivable – – 72 702 134 72 702 134
Trade and other receivables – – 10 515 10 515
cash and cash equivalents – 546 518 – 546 518
Financial liabilities
liabilities at amortised cost
Trade and other payables – – 4 141 219 4 141 219
loans payable – – 200 028 200 028
The fair values of the financial assets and liabilities disclosed under level 3 have been determined in accordance with generally accepted
pricing models. All the above financial instruments are short-term in nature and their fair values approximate their carrying values.
29. guARAnTeeS And BIllS dIScounTedAn unlimited cross deed of suretyship between ARB electrical Wholesalers (pty) ltd, elektro vroomen (pty) ltd and ARB global (pty) ltd
has been issued in favour of nedbank for facilities granted.
The following limited guarantees have been issued by ARB holdings limited to nedbank for facilities granted to:
ARB electrical Wholesalers (pty) ltd R110 000 000
eurolux (pty) ltd R51 000 000
ARB global (pty) ltd R15 000 000
ced-consolidated electrical distributors (pty) ltd R3 000 000
An unlimited cross guarantee has been issued by eurolux (pty) ltd and cathay lighting (pty) ltd to nedbank ltd for the facilities granted
to both entities amounting to R70 000 000.
guarantees issued by nedbank ltd on behalf of subsidiaries amounted to R559 231.
All the facilities within the company and the group are unutilised at 30 June 2015
Consolidated annual financial statements
| ARB Integrated report 201590
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
30. commITmenTS Group
Operating lease commitments
The group has eight (2014: eight) operating lease agreements in place as follows:
The pretoria east property, described as Shop 1 and office 1, paragon centre, 191 corobay Avenue, Waterkloof glen, is leased monthly
from 1 march 2014 to 28 february 2016 from an external party. The period of the lease is 24 months and its average monthly instalment
of R45 317 is payable in advance.
The eurolux Johannesburg property, described as 10 milkyway Avenue, linbro Business park, Sandton, is leased monthly from 1 January
2012 to 30 november 2021 from a related party. The period of the lease is 9 years and 11 months. The average monthly instalment of
R553 643 is payable in advance.
The eurolux cape Town property, described as 9 Racecourse Road, milnerton, is leased monthly from 1 January 2012 to 30 november
2021 from a related party. The period of the lease is 9 years and 11 months. The average monthly instalment of R410 036 is payable
in advance.
The polokwane property, described as unit 4c in Building 4, danielle close, corporate park II, is leased monthly from an external party
from 1 June 2010 until such time as the new polokwane premises are ready for occupation. The average monthly instalment of R48 914
is payable monthly in advance.
The ced Johannesburg property, described as unit 6, coronarium Business park, corporate north, Randjesfontein, is leased month to
month from 1 April 2015 from an external party. previously, unit 5 and 6 was leased for a 24 month period terminating on 31 march 2015
and the average monthly instalment of R45 129 was payable in advance.
The Bloemfontein property, described as portion 1 of erf 1947, Bloemfontein district, Bloemfontein province free State, situated at the
corner of price and long street, hilton, Bloemfontein, is leased monthly from 1 march 2015 to 28 february 2023. The period of the lease
is 96 months and the average monthly instalment of R79 775 is payable in advance.
The Kathu property, described as lawson 41 Trust situated on eRf 4344, Kathu – Kameeldoring ontwikkeling, Kathu in municipality
gamagara, district Kuruman, northern cape, is leased monthly from 1 July 2014 and ending 30 June 2019 from an external party. The
average monthly instalment of R37 363 is payable in advance.
future minimum lease payments under non-cancellable operating leases are as follows:
figures in Rand Up to 1 year 1 to 5 years 5 to 10 years Total
2015
pretoria east 378 148 – – 378 148
cape Town – eurolux 5 117 250 24 903 613 1 807 432 31 828 295
Johannesburg – eurolux 6 942 751 33 787 598 4 904 413 45 634 762
Bloemfontein 739 200 3 597 391 3 081 780 7 418 371
Kathu 403 916 1 470 658 – 1 874 574
Total 13 581 265 63 759 260 9 793 625 87 134 150
ARB Integrated report 2015 | 91
figures in Rand up to 1 year 1 to 5 years 5 to 10 years Total
30. commITmenTS continued2014
pretoria east 535 999 378 148 – 914 147
cape Town – eurolux 4 920 435 19 681 740 11 891 051 36 493 226
Johannesburg – eurolux 6 027 722 24 110 888 14 566 995 44 705 605
Johannesburg – ced 406 161 – – 406 161
Bloemfontein 874 800 – – 874 800
Kathu 367 196 1 874 574 – 2 241 770
Rustenburg 84 559 – – 84 559
Total 13 216 872 46 045 350 26 458 046 85 720 268
Capital commitments
After year-end the group has:
signed offers to purchase twelve passenger vehicles, including full maintenance plans, amounting to R3 021 519 including vAT; and
signed a contract to complete leasehold improvements to the pietermaritzburg branch after year end, amounting to R888 584
including vAT.
Company
Operating lease commitments
The company has fourteen (2014: thirteen) operating lease agreements in place with a subsidiary. The premises are leased monthly from
1 July 2014 to 30 June 2017. The period of the lease is 36 months and the average monthly instalment is R1 955 653.
future minimum lease proceeds under non-cancellable operating leases are as follows:
figures in RandUp to
1 year 1 to 5 years Total
2015
durban 7 486 076 8 159 823 15 645 899
durban north 458 192 499 416 957 608
east london 1 131 682 1 233 533 2 365 215
Johannesburg – Alrode 3 255 350 3 548 332 6 803 682
Johannesburg – Reuven 1 298 321 1 415 170 2 713 491
Richards Bay 1 426 505 1 554 890 2 981 395
pietermaritzburg 1 422 319 1 550 328 2 972 647
cape Town 2 115 036 2 305 389 4 420 425
nelspruit 1 399 200 1 525 128 2 924 328
pretoria West 399 202 435 130 834 332
pretoria north 729 145 794 768 1 523 913
pretoria gezina 1 417 610 1 545 195 2 962 805
centurion 833 850 908 897 1 742 747
Rustenburg 1 151 040 1 254 634 2 405 674
Total 24 523 528 26 730 633 51 254 161
Consolidated annual financial statements
| ARB Integrated report 201592
Notestotheannualfinancialstatementscontinuedfor the year ended 30 June 2015
figures in Randup to
1 year 1 to 5 years Total
30. commITmenTS continued2014
durban 6 867 960 15 645 899 22 513 859
durban north 420 360 957 622 1 377 982
east london 1 038 240 2 365 214 3 403 454
Johannesburg – Alrode 2 986 560 6 803 682 9 790 242
Johannesburg – Reuven 1 191 120 2 713 490 3 904 610
Richards Bay 1 308 720 2 981 395 4 290 115
pietermaritzburg 1 304 880 2 972 647 4 277 527
cape Town 1 940 400 4 420 425 6 360 825
nelspruit 1 320 000 2 882 352 4 202 352
pretoria West 402 240 916 343 1 318 583
pretoria north 668 940 1 523 912 2 192 852
pretoria gezina 1 300 560 2 962 805 4 263 365
centurion 765 000 1 742 746 2 507 746
Total 21 514 980 48 888 532 70 403 512
31. SegmenT RepoRTIfRS 8 requires operating segments to be identified on the basis of internal reporting on operating divisions of the group that are regularly
reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. The
group’s reportable segments were identified primarily based on the difference in products or services offered by the different segments
rather than geographical area or regulatory environments in which they operate.
Based on management’s monthly significant reporting segments, the segment report has been prepared by operating segment. As a
result, the primary reporting format is by business segments with no secondary reporting format.
The group has three operating segments from which it derives its revenue.
The activities associated with each segment are noted below:
Electrical
distributors of electrical products across three main categories: power and instrumentation, overhead line equipment and conductors,
and low voltage products.
Lighting
distributors of incandescent, energy saving led and fluorescent lamps, light fittings and electrical accessories.
Corporate
property holding and specialist IT hardware, software services and support.
ARB Integrated report 2015 | 93
31. SegmenT RepoRT continuedThe following table presents revenue and profit information and certain asset and liability information regarding the group’s business
segments for the years ended 30 June 2015 and 30 June 2014 respectively:
figures in Rand Electrical Lighting Corporate
Inter-company elimination and
reallocation Total
2015
Revenue
Segment revenue 1 740 585 055 425 499 049 38 218 800 (53 538 569) 2 150 764 335
Inter-segment revenue (455 524) (16 824 522) (7 914 267) 25 194 313 –
Sales to external customers 1 740 129 531 408 674 527 30 304 533 (28 344 256) 2 150 764 335
Results
profit before interest and taxation 122 675 760 43 800 497 30 050 787 – 196 527 044
Investment income – – 54 524 000 (54 524 000) –
Interest received 16 249 488 69 702 8 474 171 (9 618 392) 15 174 969
Interest paid (1 228 589) (6 091 756) (2 393 138) 9 618 392 (95 091)
profit before taxation 137 696 659 37 778 443 90 655 820 (54 524 000) 211 606 922
Taxation (37 629 289) (10 732 270) (10 119 477) – (58 481 036)
Profit for the year 100 067 378 27 046 173 80 536 343 (54 524 000) 153 125 886
Segment assets 805 411 886 239 195 389 374 100 780 (138 601 570) 1 280 106 485
Segment liabilities 211 317 787 121 629 058 56 238 221 (94 889 822) 294 295 244
Entity wide disclosure
Sub-Saharan revenue 74 892 006 24 405 091 – – 99 297 097
2014
Revenue
Segment revenue 1 875 876 648 350 815 274 35 057 534 (45 090 463) 2 216 658 993
Inter-segment revenue (100 085) (11 305 712) (33 062 576) 44 468 373 –
Sales to external customers 1 875 776 563 339 509 562 1 994 958 (622 090) 2 216 658 993
Results
profit before interest and taxation 138 631 237 39 511 427 26 732 425 (1 845 518) 203 029 571
Investment income – – 26 200 000 (26 200 000) –
Interest received 11 196 920 79 061 6 701 478 (6 535 249) 11 442 210
Interest paid (1 271 441) (3 690 693) (1 762 431) 6 535 249 (189 316)
profit before taxation 148 556 716 35 899 795 57 871 472 (28 045 518) 214 282 465
Taxation (41 139 366) (10 217 618) (8 695 763) 344 497 (59 708 250)
profit for the year 107 417 350 25 682 177 49 175 709 (27 701 021) 154 574 215
Segment assets 827 198 603 183 788 137 324 890 701 (102 214 627) 1 233 662 814
Segment liabilities 268 171 891 84 727 979 27 031 562 (58 502 796) 321 428 636
Entity wide disclosure
Sub-Saharan revenue 179 271 722 18 777 960 – – 198 049 682
Geographical information
All trading activities and non-current assets of the segments are domiciled in South Africa. no single customer contributes more than
10% of the group’s revenue. Transactions between reportable segments are all at arm’s length.
6 Shareholder information
95 Analysisofshareholders
96 Shareholders’diary
97 NoticeofAnnualGeneralMeeting
103 Electronicreceiptofcommunicationsandnotices
105 Formofproxy
106 Notestotheformofproxy
107 Glossaryofterms
108 Corporateinformation
ARB Integrated report 2015 | 95
as at 30 June 2015
Shareholderanalysis
Shareholder spreadnumber of
shareholdings% of total
shareholdingsShares
held%
held
1 – 1 000 shares 341 26,98 177 438 0,08
1 001 – 10 000 shares 600 47,47 2 404 018 1,02
10 001 – 100 000 shares 210 16,61 7 085 595 3,02
100 001 – 1 000 000 shares 83 6,57 29 381 034 12,50
1 000 001 shares and over 30 2,37 195 951 915 83,38
Total 1 264 100,00 235 000 000 100,00
Distribution of shareholders
Trusts 89 7,04 112 173 129 47,73
Individuals 1 004 79,43 51 302 036 21,83
Institutions and asset managers 87 6,88 49 135 114 20,91
other 16 1,27 15 537 218 6,61
private companies and closed corporations 68 5,38 6 852 503 2,92
Total 1 264 100,00 235 000 000 100,00
Shareholder type
non-public shareholders 13 1,03 137 501 752 58,52
directors and associates (direct interest) 8 0,63 30 329 544 12,91
directors and associates (indirect interest) 5 0,40 107 172 208 45,61
public shareholders 1 251 98,97 97 498 248 41,48
Total 1 264 100,00 235 000 000 100,00
Shares held%
held
Beneficial shareholders with a holding greater than 3% of the shares in issue
Burke Investment Trust 97 044 703 41,30
mr Alan Ronald Burke 18 523 077 7,88
Alan Burke Trust 9 503 505 4,04
Total 125 071 285 53,22
Shareholder information
| ARB Integrated report 201596
Shareholdersdiary
listed on JSe 20 november 2007
Announcement of interim results 12 february 2015
financial year-end 30 June 2015
Announcement of annual results 21 August 2015
last day to trade in order to be eligible to receive dividend 4 September 2015
dividend payment date 14 September 2015
Record date in respect of the dividend 11 September 2015
Integrated report posted 28 September 2015
Annual general meeting 12 november 2015
ARB Integrated report 2015 | 97
for the year ended 30 June 2015
NoticeofAnnualGeneralMeeting
ARB HOLDINGS LIMITED
(Registration number: 1986/002975/06)
Share code: ARh
ISIn: ZAe000109435
(“ARB” or “the company”)
noTIcenotice is hereby given to the shareholders of ARB that the Annual general meeting of ARB will be held at the company’s registered office
located at 10 mack Road, prospecton, durban, 4110 on Thursday, 12 november 2015 at 10:00 to (i) deal with such business as may lawfully be
dealt with at the meeting, (ii) the presentation of the directors’ report, the annual financial statements, the Audit committee report and the
Social and ethics committee report of the company for the year ended 30 June 2015 (contained in the Integrated report of the company for the
same period, of which this notice forms a part (“the Integrated report”) and (iii) consider and, if deemed fit, to pass, with or without modification,
the ordinary and special resolutions set out hereunder in the manner required by the companies Act, 2008, as amended (“the companies Act”),
as read with the listings Requirements of the JSe limited (“JSe”).
Kindly note that meeting participants (including shareholders and proxies) are required in terms of section 63(1) of the Companies Act to
provide reasonably satisfactory identification before being entitled to attend or participate in a shareholders’ meeting. Forms of
identification include valid identity documents, driver’s licences and passports.
RecoRd dATeS, voTIng And pRoXIeSplease take note of the following important dates with regard to the Annual general meeting:
Record date for the purposes of receiving this notice Wednesday, 16 September 2015
distribution of the Integrated report monday, 28 September 2015
Record date for voting purposes friday, 30 october 2015
last day to lodge proxy forms (by 13:00) Tuesday, 10 november 2015
Annual general meeting to be held at 10:00 Thursday, 12 november 2015
Results of Agm published on SenS Thursday, 12 november 2015
A shareholder of the company entitled to attend and vote at the Annual general meeting is entitled to appoint one or more proxies (who need
not be a shareholder of the company) to attend, vote and speak in his/her stead. on a show of hands, every shareholder of the company present
in person or represented by proxy shall have one vote only. on a poll, every shareholder of the company present in person or represented by
proxy shall have one vote for every ordinary share held in the company by such shareholder.
dematerialised shareholders who have elected own-name registration in the sub-register through a central Securities depository participant
(“cSdp”) and who are unable to attend but wish to vote at the Annual general meeting, should complete and return the attached form of proxy
and lodge it with the transfer secretaries of the company at least 48 hours prior to the Annual general meeting.
Shareholders who have dematerialised their shares through a cSdp or broker, other than through own-name registration and who wish to
attend the Annual general meeting must instruct their cSdp or broker to issue them with the necessary written authority to attend. If such
shareholders are unable to attend but wish to vote at the Annual general meeting they should provide their cSdp or broker with their voting
instructions in terms of the agreement entered into between that shareholder and his/her cSdp or broker.
forms of proxy may also be obtained on request from the company’s transfer secretaries. The completed forms of proxy must be deposited at,
posted or faxed to the transfer secretaries at the address below, to be received at least 48 hours prior to the Annual general meeting. Any
shareholder who completes and lodges a form of proxy will nevertheless be entitled to attend and vote in person at the Annual general meeting
should the shareholder subsequently decide to do so.
oRdInARy ReSoluTIonS1. Ordinaryresolution1:Presentationofannualfinancialstatements “ReSolved that the annual financial statements of the company for the year ended 30 June 2015, including the directors’ report, the
Auditor’s report and the Audit committee’s report and the Social and ethics committee report, be and are hereby received.”
Shareholder information
| ARB Integrated report 201598
for the year ended 30 June 2015
NoticeofAnnualGeneralMeetingcontinued
2. Ordinaryresolution2:Generalauthoritytoissuesharesforcash “ReSolved that, subject to not less than 75% of the votes of those shareholders present in person or by proxy and entitled to vote being
cast in favour of this resolution, the directors be and are hereby authorised by way of a general authority to issue any authorised but
unissued ordinary shares or securities convertible into shares for cash or grant any options for the subscription of authorised but
unissued ordinary shares for cash, at such times, at such prices and for such purposes as they may determine, at their discretion,
provided that any such general authority shall be valid only until the next Annual general meeting of the company or 15 months from the
date of the passing of this resolution, whichever is the earlier and subject to the requirements of the company’s memorandum of
Incorporation, as amended or substituted, the companies Act and the listings Requirements of the JSe, including the following
limitations:
the issue of the shares must be made to persons qualifying as public shareholders as defined in the listings Requirements of the JSe
and not to related parties;
the shares which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited
to such shares or rights that are convertible into a class of shares already in issue;
the number of shares issued for cash shall not in the aggregate during the period of this authority exceed 11 750 000 ordinary shares,
being 5% of all the shares in the company’s issued ordinary share capital as at the date of this notice, excluding treasury shares. Any
equity securities issued under this authority during the period of its validity shall be deducted from the above number of ordinary shares
and the authority shall be adjusted accordingly to represent the same allocation ratio in the event of a sub-division or consolidation of
equity securities during such period;
the maximum discount at which such ordinary shares may be issued is 10% of the weighted average price at which such ordinary
shares have traded on the JSe, as determined over the 30 business days immediately preceding the date that the price of the issue is
determined or agreed to by the directors of the company and the party subscribing for the shares; and
after the company has issued shares for cash which represent, on a cumulative basis within the period of this authority, 5% of the
number of shares in issue prior to that issue, the company shall publish an announcement containing full details of the issue (including
the number of shares issued, the average discount to the weighted average traded price of the shares over the 30 business days prior
to the date that the issue is agreed in writing between the company and the party/ies subscribing for the securities and in respect of
the issue of option and convertible securities, the effect of the issue on the statement of financial position, net asset value per share,
net tangible asset value per share, the statement of comprehensive income, earnings per share, headline earnings per share and, if
applicable, diluted earnings and headline earnings per share or in respect of any other issue of shares pursuant to this authority, an
explanation, including supporting information (if any), of the intended use of the funds, or any other announcements that may be
required in such regard in terms of the listings Requirements of the JSe as applicable from time to time.”
3. Ordinaryresolution3:PlacingunissuedsharesunderthecontroloftheDirectors “ReSolved that the authorised but unissued ordinary shares in the capital of the company be and are hereby placed under the control
and authority of the directors of the company and that the directors be and are hereby authorised, by way of a general authority, to issue
and otherwise dispose of such unissued ordinary shares at their discretion, subject always to:
ordinary resolution 2, to the extent applicable, in the case of an issue of shares for cash;
the provisions of the companies Act, the company’s memorandum of Incorporation, as amended or substituted, and the listings
Requirements of the JSe; and
such directors’ authority being limited to a maximum number of unissued ordinary shares equal to 5% of the number of ordinary shares
in issue from time to time, provided that this limitation will not apply to the issue of ordinary shares in terms of any share incentive
scheme and accordingly:
– in calculating the number of ordinary shares issued in any financial year for purposes of determining whether the aforementioned
5% threshold has been reached, any ordinary shares issued in terms of the rules of any share incentive scheme shall not be included
in the calculation; and
– the number of ordinary shares which directors are authorised to issue in terms of any share incentive scheme shall not be subject
to limitation other than in terms of the rules applicable to any such scheme.”
4. Ordinaryresolution4:Re-electionofretiringDirector “ReSolved that Alan R Burke, who retires by rotation in terms of the company’s memorandum of Incorporation, as amended or
substituted, and who, being eligible, offers himself for re-election, be and is hereby re-elected as a director of the company.”
A brief curriculum vitae of Alan R Burke is set out on page 14 of the Integrated report of which this notice forms part.
ARB Integrated report 2015 | 99
5. Ordinaryresolution5:ElectionofAuditCommitteemembers “ReSolved that shareholders elect, each by way of a separate vote, the following non-executive directors as members of the Audit
committee, with effect from the end of this Annual general meeting:
Simon downes (chairman) – Independent non-executive director; and
Ralph patmore – Independent non-executive director.
Brief curriculum vitae of the Independent non-executive directors offering themselves for election as members of the Audit committee
are set out on pages 14 and 15 of the Integrated report of which this notice forms part.
6. Ordinaryresolution6:Reappointmentofauditorsandfixingofremuneration “ReSolved that the Audit committee be and is hereby authorised to reappoint pKf durban as the auditors of the company and its
subsidiaries and R Boulle being a partner of pKf durban, as the individual designated auditor, until the conclusion of the company’s next
Annual general meeting and, in addition, the Audit committee be and is hereby authorised to determine and pay the auditors’
remuneration.”
7. Ordinaryresolution7:Signatureofdocuments “ReSolved that any director of the company or the company Secretary be and is hereby authorised to settle the terms of and sign all
such documentation and do all such things as may be necessary for or incidental to the implementation of the ordinary and special
resolutions which are passed by the shareholders.“
8. Ordinaryresolution8:EndorsementofARBremunerationpolicy(non-bindingadvisoryvote) “ReSolved that shareholders endorse, by way of a non-binding advisory vote, the company’s remuneration policy as outlined in the
Remuneration committee report set out on pages 40 and 41 of the Integrated report of which this notice forms part.”
Save for ordinary resolution 2, a 50% majority of votes cast by those shareholders present or represented and voting at the Annual general
meeting is required for the ordinary resolutions as set out in this notice to be adopted.
SpecIAl ReSoluTIonS1. Specialresolution1:GeneralauthoritytorepurchaseCompanyshares “ReSolved that the directors of the company be and are hereby authorised, by way of a general authority, to repurchase on behalf of the
company and/or any of its subsidiaries, ordinary shares issued by the company, in accordance with the companies Act, and in particular,
subject to section 48(8)(b) thereof, the company’s memorandum of Incorporation, as amended or substituted, and the listings
Requirements of the JSe, and provided that:
any such acquisition of ordinary shares shall be effected through the order book operated by the JSe trading system and done without
any prior understanding or arrangement between the company and the counter-party;
this general authority shall only be valid until the company’s next Annual general meeting, provided that it shall not extend beyond
15 months from the date of the passing of this special resolution;
an announcement setting out such details as may be required in terms of the listings Requirements of the JSe will be published on
SenS once the company or any of its subsidiaries has acquired ordinary shares constituting, on a cumulative basis, 3% of the initial
number of ordinary shares in issue as at the time the general authority was granted and for each 3% in aggregate of the initial number
of shares acquired thereafter;
in terms of the general authority, the acquisition of ordinary shares in any one financial year may not exceed, in aggregate, 20% of the
company’s issued share capital of that class, at the time the approval is granted, and the acquisition of shares by a subsidiary of the
company, in any one financial year, may not exceed, in aggregate, 10% of the number of issued shares of the company of that class;
in determining the price at which the company’s ordinary shares are acquired by the company and/or any of its subsidiaries in terms
of this general authority, the maximum premium at which such ordinary shares may be acquired will be 10% of the weighted average
market price at which such ordinary shares are traded on the JSe, as determined over the five business days immediately preceding
the date of the acquisition of such ordinary shares by the company and/or any of its subsidiaries;
a resolution shall be passed by the Board of directors that it has authorised the repurchase, that the company and its subsidiaries have
passed the solvency and liquidity tests as required by section 46 of the companies Act and that, since the test was performed, there
have been no material changes to the financial position of the company and its subsidiaries;
the company will only appoint one agent to effect any repurchase(s) on its behalf; and
the company and/or its subsidiaries will not acquire the company’s shares during a prohibited period as defined in paragraph 3.67 of
the listings Requirements of the JSe unless they have in place a repurchase programme where the dates and quantities of securities
Shareholder information
| ARB Integrated report 2015100
for the year ended 30 June 2015
NoticeofAnnualGeneralMeetingcontinued
to be traded during the relevant period are fixed (not subject to any variation) and has been submitted to the JSe in writing prior to the
commencement of the prohibited period.”
Reason for and effect of special resolution 1 (including statement of the board of directors’ intention regarding the utilisation of the
authority sought)
The reason for and effect of special resolution 1 is to grant the directors of the company a general authority, up to and including the date
of the next Annual general meeting of the company or the expiration of 15 months from the date of the passing of this special resolution,
whichever is the earlier date, for the acquisition by the company, or any of its subsidiaries, of shares issued by the company.
A repurchase of shares is not contemplated at the date of this notice; however, the directors believe it to be in the interests of the
company that shareholders grant a general authority to provide the Board with the flexibility to facilitate the repurchase of company
shares as and when the Board considers it appropriate.
please refer to the additional disclosure of information contained elsewhere in this notice required in terms of the listings Requirements
of the JSe.
2. Specialresolution2:Non-ExecutiveDirectors’remunerationfortheyearending30June2016 “ReSolved that the remuneration of non-executive directors, in the form of fees for their services as directors, for the year ending
30 June 2016 as set out below, be and is hereby approved as contemplated in section 66(9) of the companies Act:
chairman of the Board Retainer of R246 120 per annum
R27 960 per Board meeting chaired
R11 180 per sub-committee meeting attended
lead Independent director Retainer of R176 712 per annum
R11 180 per Board or sub-committee meeting attended
non-executive director Retainer of R154 344 per annum
R11 180 per Board or sub-committee meeting attended
Sub-committee chairman R16 775 per sub-committee meeting chaired
Reason for and effect of special resolution 2
The reason for and effect of special resolution 2 is to approve the remuneration of the non-executive directors in accordance with the
requirements of the companies Act and the company’s memorandum of Incorporation.
3. Specialresolution3:Financialassistanceforsubscriptionofsecurities “ReSolved that the company be and is hereby authorised, in terms of a general authority contemplated in section 44(3)(a)(ii) of the
companies Act for a period of two years from the date of this resolution, to provide direct or indirect financial assistance by way of a loan,
guarantee, the provision of security or otherwise as defined in section 44 of the companies Act to any person for the purpose of, or in
connection with, the subscription of any option, or any securities, issued or to be issued by the company or a related or inter-related
company, or the purchase of any securities of the company or a related or inter-related company, subject to the Board of directors of the
company being satisfied that:
(i) pursuant to section 44(3)(b)(i) of the companies Act, immediately after providing such financial assistance, the company would satisfy
the solvency and liquidity test (as contemplated in section 4(1) of the companies Act);
(ii) pursuant to section 44(3)(b)(ii) of the companies Act, the terms under which such financial assistance is proposed to be given are fair
and reasonable to the company; and
(iii) any conditions or restrictions with respect to the granting of such financial assistance set out in the company’s memorandum of
Incorporation and/or the listings Requirements of the JSe have been complied with.”
Reason for and effect of special resolution 3
The reason for and effect of special resolution 3 is to provide the directors with an authority to provide financial assistance to any person
for the purpose of, or in connection with, the subscription or purchase of any securities of the company or a related or inter-related
company in accordance with section 44 of the companies Act.
ARB Integrated report 2015 | 101
4. Specialresolution4:Financialassistancetorelatedorinter-relatedcompaniesandcorporations “ReSolved that the company be and is hereby authorised, in terms of a general authority contemplated in section 45(3)(a)(ii) of the
companies Act for a period of two years from the date of this resolution, to provide direct or indirect financial assistance as defined in
section 45(1) of the companies Act to a related or inter-related company or corporation, subject to the Board of directors of the company
being satisfied that:
(a) pursuant to section 45(3)(b)(i) of the companies Act, immediately after providing such financial assistance, the company would satisfy
the solvency and liquidity test (as contemplated in section 4(1) of the companies Act);
(b) pursuant to section 45(3)(b)(ii) of the companies Act, the terms under which such financial assistance is proposed to be given are fair
and reasonable to the company; and
(c) any conditions or restrictions with respect to the granting of such financial assistance set out in the company’s memorandum of
Incorporation and/or the listings Requirements of the JSe have been complied with.”
Reason for and effect of special resolution 4
The reason for and effect of special resolution 4 is to provide the directors with an authority to provide financial assistance to related or
inter-related companies and corporations in accordance with section 45 of the companies Act.
A 75% majority of votes cast by those shareholders present or represented and voting at the Annual general meeting is required for each
of the special resolutions as set out in this notice to be adopted.
AddITIonAl dIScloSuRe RequIRed In TeRmS of The lISTIngS RequIRemenTS of The JSeThe following additional information, some of which might appear elsewhere in the Integrated report of which this notice forms part, is provided
in terms of the listings Requirements of the JSe for purposes of considering special resolution 1:
major shareholders (refer to page 95 of this Integrated report); and
Share capital of the company (refer to page 71 of this Integrated report).
RepurchaseundertakingThe directors of the company undertake that they will not implement any repurchase of shares contemplated by special resolution 1 unless
they are satisfied, after considering the effect of such maximum repurchase, that for a period of 12 months following any such repurchase:
The company and the subsidiaries of the company (“the group”) will be able to repay their debts as such debts become due in the ordinary
course of business;
The assets of the company and group, fairly valued in accordance with International financial Reporting Standards and on a basis consistent
with the previous financial year, will exceed the liabilities of the company and group;
The company and the group will have adequate share capital and reserves for ordinary business purposes; and
The company and the group will have sufficient working capital for ordinary business purposes.
Directors’responsibilitystatementThe directors, whose names are given on pages 14 and 15 of this Integrated report of which this notice forms part, collectively and individually
accept full responsibility for the accuracy of the information pertaining to special resolution 1 and certify that, to the best of their knowledge
and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries
to ascertain such facts have been made and that this notice contains all information required by law and the listings Requirements of the JSe.
Materialchangesother than the facts and developments reported on in this Integrated report, there have been no material changes in the financial or trading
position of the company and its subsidiaries since the date of signature of the audit report and up to the date of this notice.
Electroniccommunicationsplease note that in terms of the companies Act and the listings Requirements of the JSe, you may elect to receive shareholder communications
and notices from ARB electronically. If you make this election, notices to shareholders of the company will be sent to you by email, which may
include a notice of the availability of documents, records, statements or other shareholder communications on the company’s website, which
you will then be able to access through the internet. If you do not make this election, printed communications from the company will be posted
to you at your registered address.
Shareholder information
| ARB Integrated report 2015102
for the year ended 30 June 2015
NoticeofAnnualGeneralMeetingcontinued
opting to receive information electronically will provide you with faster access to the latest information about ARB, whilst also saving costs for
the company and being more environmentally responsible. If you wish to receive future shareholder communications electronically, please
complete and return the attached form to our transfer secretaries.
By order of the Board
Mario Louw
company Secretary
16 September 2015
Registered office
10 mack Road
prospecton
durban, 4110
(po Box 26426, Isipingo Beach, 4115)
Telephone: +27 31 910 0200
Transfer secretaries
computershare Investor Services (pty) limited
ground floor
70 marshall Street
Johannesburg, 2001
(po Box 61051, marshalltown, 2107)
Telephone: +27 11 370 5000
fax: +27 11 688 5248
email: [email protected]
ARB Integrated report 2015 | 103
Electronicreceiptofcommunicationsandnotices
ARB HOLDINGS LIMITED
(Registration number: 1986/002975/06)
Share code: ARh
ISIn: ZAe000109435
(“ARB” or “the company”)
elecTIon To ReceIve elecTRonIc ShAReholdeR communIcATIonSplease note that in terms of the companies Act and the listings Requirements of the JSe, you may elect to receive shareholder communications
and notices from ARB electronically. If you make this election, notices to shareholders of the company will be sent to you by email, which may
include a notice of the availability of documents, records, statements or other shareholder communications on the company’s website, which
you will then be able to access through the internet. If you do not make this election, printed communications from the company will be posted
to you at your registered address.
full name of shareholder:
Reference number*:
Telephone numbers:
(office) (home) (cellular)
email address:
I elect to receive notices and other shareholder communications electronically:
Signature:
date:
* can be obtained from the envelope in which you received the 2015 Integrated report or please call the transfer secretaries on +27 11 370 5000 for details.
The completed form should be returned to the transfer secretaries via post or email:
Computershare Investor Services (Pty) Ltd
po Box 61051, marshalltown, 2107
email: [email protected]
Telephone: +27 11 370 5000
fax: +27 11 688 5248
Shareholder information
| ARB Integrated report 2015104
Notes
ARB Integrated report 2015 | 105
Formofproxy
ARB HOLDINGS LIMITED(Registration number: 1986/002975/06)Share code: ARhISIn: ZAe000109435(“ARB” or “the company”)
for use at the Annual general meeting of the shareholders of the company to be held at the company’s registered office located at 10 mack Road, prospecton, durban, 4110 on Thursday, 12 november 2015 at 10:00 and at any adjournment thereof.
for use by the holders of the company’s certificated ordinary shares (“certificated shareholders”) and/or dematerialised ordinary shares held through a central Securities depository participant (“cSdp”) or broker who have selected own-name registration (“own-name dematerialised shareholders”).
not for use by the holders of the company’s dematerialised ordinary shares who are not own-name dematerialised shareholders. Such shareholders must contact their cSdp or broker timeously if they wish to attend and vote at the Annual general meeting in person and request that they be issued with the necessary written authorisation to do so, or provide their cSdp or broker with their voting instructions should they not wish to attend the Annual general meeting in person but wish to be represented thereat.
I/We (full name in block letters)
of (address)
being the registered holder(s) of ordinary shares in the issued share capital of the company, do hereby appoint:
1. of or failing him/her,
2. of or failing him/her,
3. the chairman of the Annual general meeting,
as my/our proxy to act for me/us and on my/our behalf at the Annual general meeting of the company which will be held for the purpose of considering and, if deemed fit, passing, with or without modification, the special and ordinary resolutions to be proposed thereat and at any adjournment thereof, and to vote for and/or against the special and ordinary resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name(s), in accordance with the following instructions:
number of ordinary shares/votes
In favour of* Against* Abstain*
Ordinary resolutions
1. To receive the annual financial statements for the year ended 30 June 2015
2. To approve a general authority to issue shares for cash
3. To place unissued shares under the directors’ control
4. To re-elect Alan R Burke as a director of the company
5. To elect the Audit committee members, each by separate vote:
5.1 Simon downes (chairman)
5.2 Ralph patmore
6. To reappoint the auditors and fix their remuneration
7. To authorise directors and/or the company Secretary to act and sign documentation
8. To endorse the ARB remuneration policy – non-binding advisory vote
Special resolutions
1. To approve a general authority for the repurchase of company shares
2. To approve the remuneration of non-executive directors for the year ending 30 June 2016
3. To approve the granting of financial assistance for the subscription or purchase of securities
4. To approve the granting of financial assistance to related and inter-related companies
and corporations
* please indicate with an “X” in the appropriate spaces above how you wish your votes to be cast. If no indication is given, the proxy will be entitled to vote or abstain
as he/she deems fit.
Signed at (place) on (date) 2015
Signature
Assisted by (where applicable)
Please read the notes on the reverse side.
Shareholder information
| ARB Integrated report 2015106
Notestotheformofproxy
1. This form of proxy is to be completed only by those shareholders who:
a. hold shares in certificated form; or
b. are recorded in the sub-register in electronic form in their own-name.
2. Shareholders who have dematerialised their shares, other than own-name dematerialised shareholders, and who wish to attend the
Annual general meeting in person must contact their central Securities depository participant (“cSdp”) or broker who will furnish them
with the necessary written authority to attend the Annual general meeting, or they must instruct their cSdp or broker as to how they wish
to vote in this regard. This must be done in terms of the agreement entered into between the shareholders and their cSdp or broker.
3. each shareholder is entitled to appoint one or more proxies (who need not be shareholder(s) of the company) to attend, speak and, on a
poll, vote in place of that shareholder at the Annual general meeting.
4. A shareholder may insert the name of a proxy or the names of two alternate proxies of the shareholder’s choice in the space provided,
with or without deleting “the chairman of the Annual general meeting”. The person whose name stands first on the form of proxy and
who is present at the Annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow.
5. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder
in the appropriate box provided. failure to comply with the above will be deemed to authorise the chairman of the Annual general
meeting, if the chairman is the authorised proxy, to vote in favour of the ordinary and special resolutions at the Annual general meeting,
or any other proxy to vote or to abstain from voting at the Annual general meeting as he/she deems fit, in respect of all the shareholder’s
votes exercisable thereat.
6. A shareholder or his/her proxy is not obliged to vote in respect of all the ordinary shares held by such shareholder or represented by such
proxy, but the total number of votes for or against the resolutions or in respect of which any abstention is recorded may not exceed the
total number of votes to which the shareholder or his/her proxy is entitled.
7. documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to
this form of proxy, unless previously recorded by the company’s transfer secretaries or waived by the chairman of the Annual general
meeting.
8. The chairman of the Annual general meeting may reject or accept any form of proxy which is completed and/or received other than in
accordance with these instructions and notes, provided that he is satisfied as to the manner in which a shareholder wishes to vote.
9. Any alterations or corrections to this form of proxy must be initialled by the signatory(ies).
10. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the Annual general meeting and
speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.
11. A minor must be assisted by his/her parent/guardian unless the relevant documents establishing his/her legal capacity are produced or
have been registered by the company’s transfer secretaries.
12. Where there are joint holders of any shares, only that holder whose name appears first in the register in respect of such shares need sign
this form of proxy.
13. completed forms of proxy must be lodged with the transfer secretaries at the address provided below at least 48 hours prior to the Annual
general meeting.
AddITIonAl foRmS of pRoXy ARe AvAIlABle fRom The TRAnSfeR SecReTARIeS on RequeST.
Transfer secretaries
computershare Investor Services (pty) limited
70 marshall Street
Johannesburg, 2001
(po Box 61051, marshalltown, 2107)
Telephone: +27 11 370 5000
fax: +27 11 688 5248
email: [email protected]
ARB Integrated report 2015 | 107
Glossaryofterms
ARB electrical Wholesalers ARB electrical Wholesalers (pty) ltd
ARB IT Solutions ARB IT Solutions (pty) limited
ARB, the group, the company ARB holdings limited
Batsomi power Batsomi power (pty) limited
B-BBee Broad-Based Black economic empowerment
ced ced-consolidated electrical distributor (pty) limited
chInT Zhejiang chInT electrics co. ltd, the largest manufacturer and seller of low-voltage electrical
products in china
dIy do-it-yourself
elektro vroomen elektro vroomen (pty) limited
eRp enterprise Resource planning
eurolux eurolux (pty) limited
IcS Industrial cable Suppliers (pty) limited
JSe JSe Securities exchange
led light emitting diode
SABS South African Bureau of Standards
SAdc Southern African development community
SenS Securities exchange news Service
Shareholder information
| ARB Integrated report 2015108
Corporateinformation
Companyregistrationnumber1986/002975/06
SharecodeARh
ISINZAe000109435
Websitewww.arbhold.co.za
Registeredandcorporateoffice10 mack Road
prospecton
durban, 4110
(po Box 26426, Isipingo Beach, 4115)
Telephone: +27 31 910 0200
CompanySecretarymario louw
11 larch nook
Zwartkop X4
centurion, 0046
(po Box 23305, gezina, 0031)
Telephone: +27 12 663 5244
ReportingaccountantsandauditorspKf durban
2nd floor, 12 on palm Boulevard
gateway
umhlanga Rocks, 4319
(po Box 1858, durban, 4000)
Telephone: +27 31 573 5000
Commercialbankersnedbank ltd
90 ordinance Road
Kingsmead
durban, 4001
(po Box 3560, durban, 4000)
Telephone: +27 31 364 1111
Transfersecretariescomputershare Investor Services (pty) ltd
ground floor, 70 marshall Street
Johannesburg, 2001
(po Box 61051, marshalltown, 2107)
Telephone: +27 11 370 5000
Sponsorgrindrod Bank limited
3rd floor, grindrod Towers
8A protea place
Sandton
Johannesburg, 2146
(po Box 78011, Sandton, 2146)
Telephone: +27 11 459 1860
AttorneysWebber Wentzel
10 fricker Road
Illovo Boulevard
Johannesburg, 2196
(po Box 61771, marshalltown, 2107)
Telephone: +27 11 530 5639
InvestorrelationsagencyKeyter Rech Investor Solutions cc
fountain grove office park
no 5 2nd Road
hyde park, 2196
(po Box 653078, Benmore, 2010)
Telephone: +27 11 447 2993
Registered office
10 mack Road, prospecton, durban, 4110
po Box 26426, Isipingo Beach, 4115
Telephone: +27 31 910 0200
facsimile: +27 31 910 0299
email: [email protected]
www.arbhold.co.za